House prices expected to rise: Survey

Fairfax Media

RISING CONFIDENCE: Increasing numbers of people are expecting house prices to start rising again, ASB's housing confidence survey for the three months to July shows.

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Increasing numbers of people are expecting house prices to start rising again, ASB's housing confidence survey for the three months to July shows.

In the new survey 27 percent of respondents expect higher prices, compared to 11 percent the previous quarter. At the same time the proportion expecting lower prices fell to 31 percent from 57 percent.

That gave a net 4 percent expecting lower prices in the three months to July, down from a net 45 percent expecting lower prices in the previous report.

ASB chief economist Nick Tuffley said that after more than a year in which prices were expected to fall in the year ahead, respondents now had a more neutral view.

"On a month-to-month view the balance of price expectations lifted into positive territory in July, the first such reading for 18 months," he said.

In the past few years the housing market had swung from an extreme sellers' market to an extreme buyers' market.

The recent lift in the market had seen it move back towards a more normal balance on several measures, Mr Tuffley said.

Low mortgage rates undoubtedly had a huge impact in driving sales turnover, while fear and caution had abated since the first half of March.

For the rest of 2009 he expected housing turnover to broadly hold onto gains made in the first half of the year and possibly grind up further.

"House prices themselves appear to be bottoming out and could even lift slightly later this year," Mr Tuffley said.

While the current migration-led lift in population would put some pressure on the market, he expected the main release valve to be a recovery in construction activity over 2010, rather than prices.

ASB's July survey also found a net 54 percent of respondents believe now is a good time to buy, compared to 46 percent previously.

A net 3 percent expect interest rates to rise, sharply different from the net 30 percent who expected lower rates in the previous quarter.

Mr Tuffley said the past two years had been a sharp reminder of several home truths some property investors either overlooked or were prepared to ignore.

"House prices can fall, and cashflow -- not expected capital gain -- is what pays the mortgage," he said.

He also continued to expect the next house price cycle to be "very weak" compared to the "extraordinary" boom of 2002-2007.

"Housing had such a tremendous run over the last economic cycle that another strong price performance will be hard to achieve over the next few years -- the price correction hasn't been that large."

NZPA