Levels of optimism in the housing market are improving, but ongoing supply pressures look set to continue, according to the majors.
Housing-related sentiment is looking increasingly upbeat as interest rate cuts and expectations of further price rises lift confidence levels in the market despite persistently tight supply, according to new research.
Major bank Westpac noted that housing market sentiment has turned, with the lender’s time to buy a dwelling index surging 10 per cent in August, buoyed by the third interest rate cut of the year and a clearer signal that further easing can be expected.
Other measures also look promising, according to Westpac, including stronger buyer interest, accelerating price growth, and rising auction clearance rates.
Auction clearance rates lifted to around 70 per cent in Sydney and Melbourne, while price growth nationally has ticked up to a 0.6–0.8 per cent monthly pace.
These promising signs should lead to healthy growth in activity in the spring selling season, Westpac added.
However, the major noted that consumer risk aversion remains well above long-run averages, but it expects this to ease as the rest of the year progresses.
Housing supply is also tightening, with a meaningful lift in dwelling completions a long way off, Westpac warned, despite approvals running ahead of expectations.
Across the major capital city markets, listings sit at a 15-year low, while monthly new listings lag sales by about 7,500.
In response, Westpac has joined its major bank counterparts by revising up its price forecasts, expecting prices to finish up 6 per cent for calendar year 2025 and rise a further 9 per cent in 2026.
Commenting on expected price growth, Westpac’s head of Australian macro-forecasting, Matthew Hassan, said: “Evidence suggests there have been some structural changes around the share of non-debt funding of dwelling purchases, some of which relates to increased inter-generational support for first home buyers.
“That in turn suggests stretched affordability may be slightly slower to ‘bite’.”
Speaking about the possible supply-demand mismatch, Hassan warned: “If demand rises 10-15 per cent from here, sparks may fly.”
‘Season of opportunity’
NAB research has also shown a lift in Australia’s housing market sentiment, rising to a 12-month high.
Levels rose to +44 in the June quarter, according to NAB’s Residential Property Index, off the back of recent rate cuts and expectations of further monetary easing.
Confidence in the housing market (based on 12-month expectations of house prices and rents) also grew in the last quarter, up 11 points to 62 points, the highest in over a year.
Positive sentiment was broad-based across the country, with Victoria seeing the biggest jump from +16 points to +36 points and the ACT turning positive to +30 points after two negative quarters.
Victoria also led the way for first home buyer interest in the June quarter, at 40 per cent, followed by NSW at 36.4 per cent.
First home buyers made up 34 per cent of those interested in purchasing a property – the highest share since 2022, according to real estate agents and developers surveyed by NAB.
NAB home lending executive Denton Pugh said optimism levels were climbing in time for the spring selling season.
“Spring is traditionally the busiest time of year for property sales, and this year is shaping up to be no exception,” Pugh said.
“With recent rate cuts and confidence returning, we’re seeing more Australians, especially first home buyers, taking steps towards buying a home.
“With more homes expected to hit the market and eager buyers returning, Spring is shaping up to be a season of opportunity.”
The latest research from NAB comes the same week that separate data showed property values are rising at their fastest rate since May last year, while approvals have slipped, adding pressure on already squeezed housing stock.
The expansion of the Home Guarantee Scheme is expected to support first-time buyers, but could also maintain upward pressure on prices.
[Related: House prices accelerate into spring selling season]
