Sentiment in housing market in decline

Positive sentiment in the housing market appears to be dropping, but there is little evidence of a widespread slowdown, according to ASB Bank's latest housing confidence survey out today.

The survey results and other recent statistics suggest the market remains relatively tight.

A net 13 per cent of respondents believe it is not a good time to buy, down from a net 5 per cent in the previous quarter.

But people -- albeit fewer -- expect house price increases, ASB chief economist Anthony Byett said.

House price expectations were down slightly to a net 18 per cent (from 30 per cent), but remain above levels recorded at the same time in 2004.

Recent Real Estate Institute of New Zealand (REINZ) statistics for the median number of days to sell a dwelling remain at historically low levels, and the number of listings is still reported to be low, while the latest QV figures show the average house price has risen 15.8 per cent in 12 months.

"Evaluating the data available, the average house price is still increasing at a rate similar to most of 2004 and 2005," Mr Byett said.

A net 67 per cent (up from 51 per cent) of respondents expected higher interest rates.

"This may be of concern to the Reserve Bank as it continues to try and pull the reins in on the housing market," he added.

Mr Byett said wider trends indicated the market would probably slow -- although the timeframe is uncertain.

"Recent reports regarding the wider economy, such as business confidence, may also begin to impact on the housing market, and the Reserve Bank has made it clear it believes there is still work to be done."

In summary, Mr Byett said he expects a slower housing market in 2006 and 2007, influenced by "a probable" interest peak, ongoing income increases and only a moderate rise in unemployment.

"But again the mantra of prudence is appropriate," he warned.

"People should look at their own personal circumstances, including income expectations and debt levels and commitments, before making major spending decisions."

- NZPA