House prices to fall over 2009, won't rise until sales up for some time, ASB says

ASB's latest New Zealand Housing Confidence Survey for the three months to January showed 60% of respondents believed house prices would fall over 2009 (55% in the October survey), with 28% (29%) saying they expected prices to remain at current levels. The survey also showed 53% (45%) of respondents believed now was a good time to buy, compared to 15% (21%) saying it was a bad time. ASB Chief Economist Nick Tuffley said they expected house prices would continue to fall over much of 2009 and wouldn't increase until sales turnover had been on the increase for some time. House sales in New Zealand fell to a 17 year low in January. Of the 600 respondents around New Zealand, 63% (48%) said they expected interest rates to fall further in the next year, with 11% (18%) expecting levels to stay where they were. "As has appeared the case since early last year, declining interest rate expectations have continued to have a significant influence on attitudes towards the housing market," Tuffley said. "Lower house prices help, but the swing in the costs of debt serviceability has made a big difference to whether or not buying a house is in the grasp of would-be purchasers," he said. "Since interest rates fell dramatically late last year there have been anecdotes of renewed foot traffic through open homes "“ which is in keeping with the results of the latest Housing Survey and the preceding results." "Nevertheless, through to the end of January house sales and turnover showed very little signs of the market reviving to any great extent." "Realistically house prices aren't likely to increase until sales turnover has been on the increase for some time. In the here and now the market remains firmly a buyers' market. Turnover is very subdued even if it has stabilised. Buyers have choice and time on their side." "For the past six months the ASB Housing Confidence Survey has reported increasingly favourable perceptions towards house buying, yet the housing market has shown very few signs of recovering to date. There will be a variety of reasons for this. One is also in the survey: ongoing expectations that house prices will fall, which makes for little urgency amongst buyers. Higher deposit criteria will be another aspect." "But increasingly an air of uncertainty about the direction of the economy is taking hold on decision-making by all and sundry at present. Taking on added debt to buy a house at present does mean taking more perceived risk in the current climate, with job security one key source." "Notwithstanding the huge decline in interest rates, we still expect the housing market will remain weak over the course of 2009. Lower interest rates may well have put a floor under turnover and could aid some recovery in housing turnover during the year." "Nonetheless, we continue to expect house prices to fall over much of this year, though at a slightly more gradual pace than was the case last year."