Confidence in the housing market has continued to soften as fewer people expect prices to rise in the next year, the latest ASB housing confidence survey found.
It appeared growing awareness that interest rates would rise during the coming year, combined with uncertainty over potential tax changes to investment property to be announced in the budget this month, had made housing a less attractive investment option, ASB economists said.
The balance was now tipped slightly in favour of buyers, given that the supply of inventory was ample relative to the modest turnover.
"We expect house prices will fall 3-4 percent in 2010 as a result of this evident slowing of buyer appetite," ASB economist Christina Leung and CBA NZ economist Chris Tennent-Brown said.
The survey for the three months to April, published today, found a net 29 percent of respondents thought now was a good time to buy, compared to 33 percent in the three months to January.
A net 35 percent expected house prices would rise in the next 12 months, down from 51 percent in the previous survey.
Housing market activity had fallen sharply during the past few months, largely driven by continued uncertainty about the potential for tax advantages for property investment to be removed in the budget.
The fall in expectations of price rises was broad based, but particularly strong in the North Island outside of Auckland.
Beyond the ups and downs of 2010, the economists said they expected weak house price growth.
"A positive for house prices is continued population growth at a time when new construction has not kept pace," the economists said.
"However, prices do remain quite high compared to incomes and rents -- with the tax changes likely to require even higher gross rental yields in the future to make the sums add up."