BNZ's Tony Alexander sees housing sentiment improving

BNZ Chief Economist Tony Alexander said there had been a significant improvement in sentiment in the residential real estate market, according to BNZ's latest confidence survey. Despite the survey showing a net 23% of respondents expected the economy to get worse over the coming year (net 6% previously), Alexander said the "one very clear change" in sentiment was in the residential real estate market. However, with the unemployment rate set to "soar," Alexander did not link the change in sentiment to a rise in house prices. The latest QV figures show house values in New Zealand have fallen 9.9% from their peak, with REINZ figures showing a 7.7% decrease. Residential sales volumes fell to a 17 year low in January. "Lower interest rates along with increasing perceptions of a shortage have contributed to a significant improvement in sentiment," Alexander said.

"At the same time as vendors have become more realistic in the prices they will accept more buyers have been entering the market. They appear to be a mixture of both owner-occupiers getting on with life and investors attracted by yield compared with the alternatives," he said. "This does not encourage us to write in terms of rising prices "“ not with the unemployment rate set to soar. But it appears increasingly that the market is "clearing" more easily and it is becoming appropriate to speak in terms of turnover having passed its weakest point. What will be interesting is the impact later this year and through 2010 of an expected surge in net immigration and worsening housing shortage due to the construction collapse," he said. REINZ figures for February are due out in the next day or so.