Home buying confidence may be subdued, but it's still hanging in there above most other measures of general business and consumer confidence.
In ASB Bank's latest Quarterly Housing Report, out this week, Senior Economist Rozanna Wozniak says that real estate activity is likely to remain quiet over the rest of the year.
"This could see house prices edge down slightly further, although some modest seasonal spring improvement should start to provide some support for the market," she says.
"Fundamentals suggest that there is no reason for activity and house prices to continue on a sustaineddownward trend."
Wozniak says that much-needed support for the housing market could come next year as consumers become less concerned about interest rate rises, the state of the economy, job security and government policy.
While confidence has edged back slightly among those surveyed (a net 28 per cent thought it was a good time to buy a home, compared with 32 per cent the previous quarter), the ASB Bank report points out that:
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Optimists still outnumber pessimists, and
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Housing confidence is well above the lows of 1996, when only a net 7 per cent thought it was a good time to buy.
There's also a lot of regional variation:
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The weakening in confidence over the three months to July was not widespread throughout the country, but was largely driven by Wellington and the South Island (ex Christchurch).
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And yes, Wellington stands out - again - as the least optimistic region. That's mainly because it's been bucking the trend with rising house prices (up 55 per cent since late 1993) and buyers are questioning how much longer that can last.
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By contrast, Auckland is one of the most positive regions, as its falling house prices have softened the impact on home affordability made by rising interest rates.
With economic growth expected to centre on rural and export communities, Wozniak says that rising incomes should provide some support for the housing market in those regions.
"Conversely, larger cities are likely to find that activity remains quiet. Over time, however, the higher incomes being earned by the export centre should flow into the main centres."
