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Aussies sitting on the fence as housing sentiment shifts

by Reporter6 minute read

Recent political and economic developments have helped trigger a spike in property price sentiment, but fewer Australians are willing to make a move in the market, according to new research.

ME’s latest Quarterly Property Sentiment Report, which involved a survey of 1,000 active participants in the property market over the three months ending 30 June 2019, has found that Australians are increasingly optimistic about house price growth over the coming 12 months, as also reflected in NAB’s latest Property Sentiment Survey.

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According to the findings from the member-owned lender, only 17 per cent of respondents are expecting house prices to fall over the coming months, down from 28 per cent in the previous quarter, with 38 per cent expecting prices to rise (32 per cent in the previous quarter), and 30 per cent expecting them to remain stable (up from 29 per cent).

Reflecting on the research, ME’s group executive of customer banking, Craig Ralston, observed that the rise in sentiment has been driven by “changes in the external environment”, which include the outcome of the federal election, the Reserve Bank of Australia’s (RBA) cuts to the cash rate, and the Australian Prudential Regulation Authority’s (APRA) changes to its mortgage serviceability guidance.


However, respondents noted that they remain concerned about housing affordability, with 93 per cent agreeing that despite price falls in some areas, they still think housing affordability is “a big issue”, up from 88 per cent in the previous quarter.  

“House prices remain high by historical and international standards; hence, perceived worries about affordability may take time to shift,” Mr Ralston said.

ME reported that all other perceived worries queried in the report have eased over the past three months, including concerns about tighter credit policies (10 percentage point drop), concerns over negative equity (7 percentage point drop), concerns about being forced to switch to interest-only repayments (7 percentage point drop) and concerns about property values falling (5 percentage point drop).

“Reduced concern is likely connected to the increased sense of optimism about house prices,” Mr Ralston added.

Additionally, fewer respondents expressed concern about the recent housing downturn, with 61 per cent stating they were happy property prices are falling (up from 59 per cent) as the declines would improve housing affordability.  

According to ME’s survey, first home buyers (FHBs) are happier (86 per cent) about recent price movements than other cohorts.  

Home buyers ‘sitting on the fence’

The report also found that respondents are more reluctant to make a move into the property market than they were in the previous quarter, with intentions to buy down 3 percentage points, intentions to sell down 1 percentage point, and intentions to do neither (i.e. stay put) up 5 percentage points.

According to the survey, the most likely buyers are higher-income earners, with 45 per cent of respondents earning over $125,000 intending to buy.

Further, the research found that those aged between 25-39 were less eager to buy a home, down 8 percentage points from 52 per cent to 44 per cent.

The survey also revealed that investors were most likely to buy in the next 12 months (44 per cent), followed by first home buyers (42 per cent) and owner-occupiers (24 per cent).

“There are more fence-sitters who appear to be taking a ‘wait and see’ approach to the market – which is not surprising considering the recent economic and political changes,” Mr Ralston said.

The research found that, overall, 41 per cent of respondents are feeling “neutral” about the property market, 33 per cent are feeling positive, and 26 per cent negative”.

The research found that sentiment varied by age, property status and property intent, with younger people and investors feeling less positive (8 and 4 percentage points less, respectively) about the market than in the previous quarter.

In contrast, owner-occupiers and those intending to sell in the next 12 months are feeling more optimistic.

“The housing market has seen a moderation in the rate of house price decline in Australia’s key property markets over the last three months,” Mr Ralston said.

“Positivity among sellers and owner-occupiers suggests these groups see the recent market trends as a sign their homes are retaining or regaining value again.

“The drop in positive sentiment among investors is surprising considering negative gearing now seems to be off the table and APRA has proposed changes to home loan serviceability.”

[Related: Outlook strengthens for house prices and rents, finds NAB]

Aussies sitting on the fence as housing sentiment shifts
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