The ASB Bank’s Housing Confidence survey published today shows New Zealanders expect house prices and interest rates to go on rising.

The bank believes this will lead to a riskier home ownership environment in the year ahead.

The ratio of house prices to incomes is going up. This means people have higher mortgages and interest payments. Throw in higher interest rates and the ratio of interest payments to income rises even further. The bank notes, therefore, that 2006 is shaping up for a tougher economic climate and concludes that now is a time for prudence.

45 percent of people surveyed by the bank expect further house price rises. This is higher than in the previous three months when 39 percent expected house prices to go on rising. 15 percent of people now expect house price declines (down from 18 percent last quarter) and 40 percent expect no change.

Despite the expectation of further house price rises, only 22 percent of people surveyed think now is a good time to buy a house while 27 percent think it is not.

The bank says its own lending figures point to activity and upward price pressure continuing in October and also that people are fixing their interest rates longer term, enabling them to get interest rates below 8 percent.

Figures from the Reserve Bank of NZ show lenders increased their lending to the household sector by 15 percent in the year to September 2005.

In the last 18 months, interest payments for the average Kiwi household have risen from an average of 8.5 percent of income to 11 percent of income.