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Housing market optimism picks up

Wednesday 20th August 2008

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New Zealanders are growing more optimistic about the housing market amid prospects for lower mortgage rates, according to ASB Bank.

There is "some improvement in sentiment towards the housing market, likely influenced by expectations that mortgage rates will fall," chief economist Nick Tuffley said in the report. Still, "respondents are increasingly downbeat on the outlook for house prices."

The percentage of people deeming it a good time to buy a house rose to 37% in the latest ASB survey, from 25% in the May report, the bank said. A net 55% expect house prices to fall, the weakest reading since ASB started the survey in 1996.

Reserve Bank Governor Alan Bollard last month cut the official cash rate a quarter point to 8% and said more reductions are likely provided inflation peaks as expected in the third quarter and the kiwi dollar's decline isn't excessive. The ASB survey comes after figures last month showed home building consents tumbled 20% in June.

Tuffley said a recovery in the property market will likely be modest as household incomes are under pressure, borrowing costs are still relatively high and home prices are still steep compared to incomes.

By Jonathan Underhill

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