[color=blue:d9017f0aa9]From The New Zealand Outlook[/color:d9017f0aa9]

[size=18:d9017f0aa9]House prices steady as market slows[/size:d9017f0aa9]

MIGRANTS arriving in New Zealand in the next few months could do well to hold on to their money and rent instead of rushing to buy that dream home.

There is a familiar look to the latest ASB Banks Housing Confidence survey for the three months to July. The survey results and recent market reports are generally consistent with a return to the housing conditions that existed in 2004 before the March quarter 2005 rise in housing demand. Housing activity is lower but the market is still busy; house prices, on average, are still rising albeit at a slower rate; and people on balance are expectant of further price increases but remain cautious. Only 20 per cent of those surveyed believe house prices will rise in the next 12 months, down from a net 28 per cent last quarter, and only slightly above the average net response since January 2004.

The pessimism of South Islanders continues in the latest survey. A net -5 per cent expect house prices to increase, compared with a net 10 per cent in Auckland and a net 40 per cent in the rest of the North Island. People still generally expected interest rates to increase although the proportion expecting higher interest rates dropped from a net 62 per cent to a net 46 per cent.

On balance people do not consider now a good time to buy a house. There was a small drop from a net 1 per cent to 3 per cent but this level is similar to the 5 per cent average of the last two years. The mix of responses to the survey is similar to those received last year. Likewise the outlook is very similar, namely house prices and debt burdens are high and suggestive of a slower phase in the housing market.

This has happened in places such as Nelson, Queenstown and Auckland, centres generally to the fore of the housing upturn, and is still likely to occur amongst the wider economy. The degree of confidence in housing amongst the investment community was evident in the July 2005 ASB Investor Confidence report, showing residential rental property investment still ranked number one for expected returns.

These survey results are consistent with other data in the market pointing to continued house price increases. It appears that the demand crest has come and gone and the steadier market conditions of 2004 have been resumed. What happens next is always the tricky question. The momentum and opinions shown at present are suggestive of a 'soft landing'.

Likewise the moderate level of interest rates, the low levels of unemployment, the ongoing household income growth and signs that immigration has stabilised also point towards to any slowdown being moderate for the housing market in general.

Keeping with the return to 2004 conditions, the last word remains the same: it is the forced sellers that will experience difficulty in the next year or two. A wider look at one's personal and business situation remains a prudent step while more cautiousness when selling and buying is recommended.