People’s confidence about the housing market surged in the three months ended April, partly fuelled by declining interest rates, according to the ASB Bank’s latest survey.
The Reserve Bank has cut its official cash rate, which influences wholesale and retail interest rates, three times this year from 6.5% to 5.75%.
In ASB Bank’s survey, a net 49% now think it’s a good time to buy a house, up from a net 37% three months earlier. Respondents also cited favourable house prices as a reason for improvement in confidence.
ASB Bank economist Rozanna Wozniak says increased confidence in the economy, and therefore greater job security, and reports of higher real estate sales have also contributed to the improved confidence.
Unemployment has fallen to a 13-year low of 5.4%. "Our estimates suggest that turnover, in seasonally adjusted terms, has risen approximately 40% from the lows of last October. Although this improvement comes off a low base, it nevertheless confirms that the trend has now solidly turned," Wozniak says.
But expectations that house prices will rise have increased only modestly, she says. "For the most part, respondents are reasonably realistic about the outlook,’’ she says. Almost half of respondents expect no change in house prices while a net 22%, up from 17% three months ago are expecting price increases.
Wellington was the big exception. Even though Wellington is the one place where house prices have risen strongly through the last decade, and there’s increasing evidence price increases are slowing, a net 35% of respondents expect Wellington house prices to go up.
While the lower end of the housing market was quiet last year, there is evidence that first-home buyers are gradually returning, Wozniak says.
As we move into the traditionally slower winter months, Wozniak expects house prices will continue to stabilise in most regions. While small price gains are possible in some regions during the next few years, strong price rises are unlikely in the current environment of weak population growth and only modest economic growth, she says. As well, interest rates have probably bottomed, she says.
