Confidence in the New Zealand housing market, which recovered in 2009, is showing signs of softening again, according to a survey of the three months to January.Possible changes to tax rules around housing and a flagged increase in the official cash rate
Confidence in the New Zealand housing market, which recovered in 2009, is showing signs of softening again, according to a survey of the three months to January.
Possible changes to tax rules around housing and a flagged increase in the official cash rate (OCR) around the middle of the year meant uncertainty was weighing down the market, said ASB chief economist Nick Tuffley as the bank's housing confidence survey was released today.
It surveyed 200 people in each of the Auckland, the rest of North Island and South Island areas. Forty-eight percent expect house prices to increase in the next 12 months, up from 40 percent in October, 37 percent believe now is a good time to buy (down from 48 percent) and 51 percent expect interest rates to rise in the next 12 months (up from 35 percent).
The housing market's momentum started to slow somewhat since November. Recent data suggest a sharp sales drop in January, although the bank was slightly wary of sales figures around Christmas as the housing market was heavily affected by the holiday period over December and January, Mr Tuffley said.
The combination of low mortgage rates and falling house prices during the first half of 2009 saw affordability finally start to improve. However, housing confidence started to soften a touch in the three months to January 2010, Mr Tuffley said.
The survey results implied that the resurgence of housing last year would abate slightly in 2010. People were more aware that interest rates will go up this year, and the Reserve Bank's "middle of 2010" implied timing for OCR increases was getting closer, he said.
It also showed the pattern over the three-month period was for Aucklanders to become increasingly more optimistic about the house price outlook while respondents in the rest of the North Island and in the South Island, which had been the "roaring bull", started to become more cautious.
"However, one development that caught our attention has been the turnaround in the number of days to sell, now starting to pick up again after falling sharply. Although days to sell still remain below average and still slightly in sellers' market territory, the change in direction suggests some of the intensity in the housing market is beginning to ease."
The number of days to sell, a reliable barometer of the balance between supply and demand, began to fall swiftly through 2009.
Mr Tuffley said the Government has indicated that it was ruling out measures such as capital gains tax or land tax but he expected it would make some changes to the tax treatment of property.
Two potential options were the ability to claim deprecation or ring-fencing tax losses from property so they cannot be used to offset other sources of income.
"The lack of complete clarity over what the Government will do means the market will continue to be weighed down by uncertainty until the end of May, and could see reduced house sales and price pressures over the next few months."
