Here are four reasons why I don’t buy into the pessimistic view.

1. Mortgage rates are low and the shorter-term ones are destined to go lower. The Reserve Bank will cut its OCR again (by how much is another question). It will cut as the economy is in a recession and there are no signs of it emerging and the dollar is heading in the wrong direction, undoing previous cuts. Added to that, banks haven’t passed on all of the recent OCR cuts.


2. House Sales are stabilising. While it is always risky reading into data and trying to pick early trends, it seems that on a seasonally-adjusted basis sales have stabilised. There is clearly a lot more activity in the market and that is likely to help stabilise prices, not push them lower.


3. Supply and demand. House construction statistics show there is nowhere near enough construction going on to increase the housing stock, especially when population growth through immigration is thrown in. This can only be a plus for property investors.


4. Falling cost of living. There is a view that people are stretched to meet their home loan repayments. Sure some are, but others and particularly those who have job security, should be okay. Interest rates are coming down, so to is the cost of other living expenses including petrol (compared to last year). On the other side of the balance sheet there are tax cuts. I suspect for the majority of people the squeeze, while there, isn’t as bad as some suggest.

While these are four factors which tend to support the market, there are also plenty of risks out there too. It is important to put these factors into perspective, which on balance seem to me to indicate that we are somewhere near the bottom, but there won’t be a massive uptick either. Rather we are talking about a slow, gradual climb out of the market trough.