Optimism lingers despite housing fragility, says ASB

Photo / Paul Estcourt

The housing market may be weak but ASB's quarterly survey of sentiment towards the market remains steady at "resilient" levels.

A net 27 per cent of respondents over the three months to January considered it a good time to buy, down only fractionally from the three previous surveys.

Expectations of price increases have stabilised over the past six months, with only a net 9 per cent in the latest survey expecting them to rise in the next 12 months, after falling sharply in the first half of last year.

And a net 55 per cent expect interest rates to rise in the year ahead, down from a net 61 per cent in the previous survey.

ASB chief economist Nick Tuffley said he would describe housing market sentiment as resilient.

"Housing confidence has held up reasonably well given how weak the market seems to be. There is a reasonable amount of optimism considering you have incredibly low turnover and prices easing back slightly."

Even with relatively few new listings coming on to the market the level of inventory relative to turnover is about twice what it was at the peak of the property boom.

The median number of days it takes to sell - 43 when seasonally adjusted - is well above the long-run average, Tuffley said. "It is a buyer's market."

Asked to explain the apparent disconnect between resilient surveyed sentiment and cautious actual behaviour, Tuffley said: "It is one thing to recognise that it is a good time to buy and conditions are reasonable and another to decide you actually want to buy right now.

"What we are surveying is a whole group of people, some of whom might not be interested in buying a house right now anyway. Right through the housing boom people thought it was a bad time to buy yet away they went."

The housing market was more resilient in Auckland than nationwide, Tuffley said. A net 21 per cent in the region expect house prices to increase, compared with a net 3 per cent in the rest of the North Island and a net 7 per cent in the South Island.

"The relatively tighter housing market in Auckland is due to stronger fundamental factors, particularly higher population growth. High housing demand in Auckland is also flowing through to stronger rental inflation in recent months."

Tuffley expects the housing market to remain soft over the first half of this year with turnover weak and prices continuing to drift down slightly. "But things will stabilise around the middle of this year and gradually improve."

The population continues to grow but building consents issuance is at historically low levels.

In the mean time, relatively low interest rates were proving a lot less stimulatory than they have in the past.

"There is very little need for the Reserve Bank to raise them when caution and low demand are taking care of inflation pressure."