Rising property prices expected but buyers remain wary

By BRIAN FALLOW economics editor

People are in two minds about the housing market, the ASB Bank's quarterly survey of housing confidence has found.

On the one hand, they expect house prices to go up, especially in Auckland. That is usually a signal to buy.

On the other hand, responses to the question "Is this a good time to buy?" have weakened, again especially in Auckland, and are now at levels that would be considered low, the ASB chief economist, Anthony Byett, said.

The contrast is particularly stark in Auckland.

There, a net 53 per cent expect prices to rise, but only 17 per cent say that it is a good time to buy.

Generally the "good time to buy" indicator closely mirrors the rise and fall of floating mortgage rates.

But, since April, this measure of housing confidence has fallen sharply while floating rates have increased only moderately.

Byett puts the weakness in sentiment down to general uncertainty about the world economic outlook, in particular, the fallout from tumbling sharemarkets, and the possibility of war in Iraq and what that might do to oil prices.

It is the same sort of anxiety as is being picked up by business confidence surveys, Byett says.

House price expectations, however, are high.

In Auckland, the net percentage of respondents expecting prices to rise is the highest it has been in the six years the survey has been going.

"The average Auckland house price seems to have increased by 6 or 7 per cent in the first half of 2002," Byett says.

"The current level of price expectations suggests something similar in the second half of the year."

Net immigration remains strong.

The median number of days it takes to sell a house is low, and so is the number of houses listed for sale - both are indicators of tightness in the market.

"There has been the hint of higher housing turnover in recent weeks, consistent with another upsurge in activity," Byett says.

The global factors weighing on confidence have the potential to blow over quickly, he says.

If they did so, the situation was ripe for a busy summer in the housing market.

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