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  1. #1
    Join Date
    Sep 2003
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    High up above and deep down under
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    Default Housing market slowing, another surge unlikely

    Hi Guys

    Housing market slowing, another surge unlikely

    08.08.05
    By Brian Fallow

    The housing market has returned to the less hectic conditions that prevailed before a spike in demand late last year and early this year, ASB Bank says in its quarterly report on the market.

    "The market may be slowing but it remains quite active," said ASB chief economist Anthony Byett.

    "You can't dismiss the possibility of another surge in demand, if the perception gets around that interest rates have peaked and something causes lower fixed rates among the banks."

    But the more likely outlook is for a slowing housing market over the next couple of years, he said.

    "I know that slower housing activity was generally expected this time last year and that forecast proved incorrect. But the same factors are still there and they will eventually tell."

    House prices have risen a startling 74 per cent since the latest boom began in mid-2001.

    It has outstripped the 55 per cent rise in the previous upturn (between mid-1992 and the end of 1997) and is equivalent to a 59 per cent rise in real terms.

    The real price rise over the past four years is greater than in the three previous housing upturns.

    Other indicators of affordability are also stretched: household debt is nearly 1.5 times disposable incomes and the cost of servicing that debt at current interest rates is biting more from incomes. Nevertheless, house prices and household debt continue to rise apace.

    Provisional figures from Quotable Value NZ show house prices rose 14.3 per cent nationwide in the July year.

    Byett said house prices rose by nearly 3 per cent in the June quarter, down from the 5.3 per cent pace recorded in the March quarter, but in line with the average 2.9 per cent per quarter recorded in 2004.

    ASB's survey found on balance people consider the housing market to be a seller's market.

    Twenty-five per cent of respondents consider it a good time to buy but 28 per cent a bad time.

    The net 3 per cent considering it a bad time to buy is slightly above the net 5 per cent average of the past two years.

    A net 20 per cent of respondents expect house prices to rise over the next 12 months, down from a net 28 per cent in the previous quarter but up from a net 2 per cent this time last year.

    In contrast to the financial markets (which expect the next move in interest rates to be down, but not until early next year), a net 46 per cent of respondents expect interest rates to rise over the next 12 months.

    Byett does not expect a repeat of the 40 per cent fall in house prices that followed a steep rise in the early 1970s, which took place in an environment of very high general inflation and a sharp fall in the terms of trade.

    Any decline should be softened by rising wages, a more stimulatory fiscal policy and improved export returns from a lower dollar.

    "The more likely scenario is one in which the average house price stops increasing. A modest average decline is possible - the Reserve Bank suggests 10 per cent - but a large part of any adjustment is likely to involve slower sales, with sellers holding out for a high price."
    News source:
    http://www.nzherald.co.nz/index.cfm?...ectID=10339611

    Regards
    "There's one way to find out if a man is honest-ask him. If he says 'yes,' you know he is a crook." Groucho Marx

  2. #2
    Join Date
    Jun 2005
    Location
    Auckland
    Posts
    5,086

    Default

    "I know that slower housing activity was generally expected this time last year and that forecast proved incorrect. But the same factors are still there and they will eventually tell."
    Talk about hedging your bets!

    So, the ASB is saying - the same things that applied last year apply this year, so we'll make the same predictions even though we were wrong then.

    What's that saying about doing the same thing and expecting different results

    cube
    DFTBA


 

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