N.Z. Consumers Expect House Prices Will Rise, ASB Survey Shows
More New Zealand consumers expect higher house prices, adding to the case for a pick-up in the residential property market that may deter the central bank from cutting interest rates, according to ASB Bank Ltd.
The proportion of respondents expecting prices to rise over the next 12 months increased to 57 percent in April from 45 percent in January, Auckland-based ASB said in an e-mailed report, citing a survey. More than a third said it was a good time to buy a house.
Rising house prices may boost consumer confidence, undermining bets that the central bank will cut the official cash rate this year. Reserve Bank of New Zealand Governor Alan Bollard has kept the benchmark at a record-low 2.5 percent since March 2011.
“The very strong level of house price expectations demonstrates that there is a risk of more sustained house price inflation,” ASB Chief Economist Nick Tuffley said in the report. “The Reserve Bank will likely bear this in mind when considering the appropriateness of cuts to the cash rate.”
Tuffley expects no change in borrowing costs until a quarter-point rise in March.
“Price expectations are at elevated levels in most areas of the country,” he said. “An environment of low mortgage rates and greater confidence that prices will go up is one that is ripe for an increase in speculative activity that the Reserve Bank views dimly.”
Prices rose 2.7 percent in April from a year earlier, according to Real Estate Institute figures. ASB forecasts house prices will rise 4 percent in 2012 as more properties are put on the market, Tuffley said.
In the survey, 36 percent of respondents said it was a good time to buy a house, up from 34 percent in January. The proportion saying it was a bad time was little changed at 15 percent. Those expecting home-loan interest rates to rise in the next 12 months fell to 48 percent from 51 percent.
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