New Zealand Outlook for Housing Market Improves, ASB Bank Says

By Tracy Withers

Aug. 20 (Bloomberg) -- New Zealand consumers are more optimistic about the housing market amid expectations interest rates will fall, according to an ASB Bank Ltd. survey.

Thirty seven percent of 600 people surveyed said it is a good time to buy property compared with 25 percent in the previous survey in May, ASB said in a statement e-mailed to Bloomberg News. The proportion saying it is a bad time to buy dropped to 25 percent. The 9 point difference was the most optimistic since 2003, ASB said.

Reserve Bank Governor Alan Bollard cut the benchmark interest rate in July for the first time in five years and said further declines are likely because the economy is slowing. Fewer consumers expect home-loan interest rates will rise, fanning confidence in the property market, said ASB Chief Economist Nick Tuffley.

``The high cost of debt servicing has undoubtedly been a key factor in the slowdown by pricing people out of the housing market,'' said Tuffley. ``Lower interest rates have the potential to put a floor under the market after a time by improving affordability.''

Just 37 percent of those surveyed expect home-loan interest rates will rise compared with 62 percent in May. Thirty percent expect lower borrowing costs.

Still, the more optimistic outlook on interest rates will be offset by increased pessimism on house prices, said Tuffley. Sixty-four percent expect prices will fall over the next year, the most since the survey began in 1996.

``Respondents might view some improvement in their ability to fund a purchase, but their outlook for prices suggests they will be in no hurry to act,'' he said.

High credit costs and falling house prices have forced buyers out of the market, sending house sales to a 16-year low in June, according to Real Estate Institute figures.

ASB expects prices will remain weak for the rest of 2008, and predicts any pickup in 2009 will be modest, said Tuffley.

To contact the reporter on this story: Tracy Withers in Wellington at twithers@bloomberg.net.