The housing market doesn't look remotely like complying with Reserve Bank governor Alan Bollard's wishes that it take a breather.
While a majority of people think now is a bad time to buy a house, a stronger majority expect house prices will keep rising, even though an even bigger majority are expecting interest rates will rise further, according to ASB Bank's latest housing confidence survey.
ASB chief economist Anthony Byett says it isn't surprising that a net 5% of those surveyed, up from 3% three months earlier, think it's a bad time to buy a house. That's in light of the fact that both house prices and interest rates are at very high levels relative to incomes.
A net 30% expect house prices will rise in the next 12 months, up from 20% three months ago. That opinion hardened toward the end of the survey period with a net 31% of those surveyed in October expecting prices to rise.
A similar pattern can be seen with interest rate expectations. A net 51% were expecting interest rates to rise and of those surveyed in October, 72% expected them to rise. Bollard delivered on his threats to raise rates on October 27 when he raised his official cash rate from 6.75% to 7%.
Byett says he isn't sure what it will take to slow the market. 'It's difficult to see a shock on the horizon at the moment, unless the Reserve Bank becomes very niggardly about it,' he says.
'Some are suggesting it will take a very big rise in interest rates. Some will say it's going to sort itself out with new supply coming on.'
There does appear to be a fundamental shortage of houses in some areas, although that certainly isn't the case in some of the hot spots, particularly coastal properties, he says.
ASB's survey shows Aucklanders remain the most positive with a net 8% saying it's a good time to buy a house. People in the rest of the North Island were much more negative with a net 11% saying it's a bad time, although a net 37% were expecting further price hikes. A net 6% of South Islanders think now is a bad time.
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