New Zealand’s housing market will recover slowly this year as record-low interest rates bolster consumers’ views that prices will keep rising, ASB Bank Ltd. said, citing the results of a quarterly survey. The proportion of respondents expecting higher home prices rose to 36 percent from 32 percent in the previous survey in January, Auckland-based ASB said in an e-mailed report today. Forty-one percent said now is a good time to buy a house, up from 39 percent in the previous survey. “We expect house prices to grow modestly at a rate of around 3 percent over the coming year,” ASB Chief Economist Nick Tuffley said in the report. “A combination of a contained level of housing inventory, positive population growth and the recent drop in interest rates will underpin a gradual recovery in housing demand.” House prices rose to a 12-month high in April and further gains may prompt central bank Governor Alan Bollard to raise interest rates later this year. Bollard last month left the official cash rate at a record-low 2.5 percent and said it was appropriate borrowing costs should stay at that level “for some time” as the economy recovers from an Feb. 22 earthquake in the nation’s second-biggest city, Christchurch. There is a 78 percent chance of a quarter-point rate rise by December, according to swaps trading. Still, variable home-loan interest rates are at 46-year lows, according to central bank figures, and Tuffley said low borrowing costs have increased the appeal of housing as an investment, bolstering demand. The percentage of respondents in ASB’s survey expecting higher home-loan interest rates over the next 12 months fell to 46 percent from 59 percent, the bank said. Twelve of 17 economists surveyed by Bloomberg News last month expect Bollard will leave the cash rate unchanged until next year. To contact the reporter on this story: Tracy Withers in Wellington at twithers@bloomberg.net To contact the editor responsible for this story: Stephanie Phang at sphang@bloomberg.net

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