It will not be long before evidence emerges as to whether, with the onset of spring, improved vendor price expectations will lead to a flood of properties hitting the market, BNZ chief economist Tony Alexander says.
"The risk of this happening explains why one could see average sale prices dipping a bit in coming months. But even if such a dip occurs - not highly probable - it is likely to be shallow and short-lived when one considers the fundamentals for the housing market which we have been hammering away at for the past years."
Important factors were:
• There was an existing shortage of accommodation.
• The construction of new dwellings to meet the shortage was at the lowest level in 40 years.
• The ability of builders to respond to the supply shortage was limited by reduced availability of finance to developers.
• Floating-rate mortgage costs were at their lowest level in 40 years.
• Population growth was accelerating because of improving migration flows.
It was simple to work out what those factors meant for prices, he said.
Prices were high using measures of price to income, he said.
But if fair value/trend price models worked for forecasting house-price movements, no-one would ever see prices deviating from those trends or "sustainable levels".
If an asset's price was 20% above trend, it was first 10% above and did not fall.
The reason the price was 20% above trend could be that it was on its way to being 60% above trend, Mr Alexander said.
ASB Bank retail banking executive Ian Park said the bank had reduced its floating home mortgage rate by 0.65% to 5.75%, its lowest floating rate in more than 40 years.
A customer with a $200,000, 20-year floating mortgage would be paying $75 a month less.
"This is our lowest home-loan floating interest rate since December 1967, the year that decimal currency was first introduced in New Zealand."
The bank's range of fixed-term lending rates had been "fine-tuned" and some short-term deposit rates lowered.
The bank had kept its six-month home lending rate at 5.5%.
The one-year, 18-month and two-year rates had increased by 0.2% to 5.7%, 6.3% and 6.75% respectively.
