Borrowers reveal why they are deserting the housing market

Some 41 per cent considered it a bad time to buy a first home, while 47 per cent believed conditions were unfavourable for selling.

Affordability was the leading influence on property decisions, cited by 40 per cent, ahead of interest rate uncertainty at 32 per cent and falling prices at 30 per cent.

Westpac chief executive, consumer, Carolyn McCann said households were struggling to interpret competing economic and housing signals.

“We’re not seeing a mood of crisis, rather a mood of concern. The market has paused as people try to make sense of conflicting signals around interest rates, house prices, cost-of-living pressures and the broader economy,” McCann said.

However, McCann added that the bank’s mortgage application activity had begun recovering, despite remaining below its May level.

“While we’ve seen a downturn in mortgage applications of around five per cent since May, activity is beginning to recover with applications up 15 per cent from the July low,” she said.

Waiting, not walking away

Yet the hesitation has not extinguished ownership aspirations, with the bank reporting that 79 per cent of first home buyers (FHBs) reported greater motivation to purchase than a year earlier.

McCann said the desire to transact remained, although the search for certainty could carry its own risks.

“People still want to buy and sell property, but many are seeking greater certainty before making a move. The challenge is that waiting for the perfect moment can mean missing opportunities that are right in front of you,” she said.

The report found 55 per cent of FHBs intended to change their housing circumstances within a year, including renovating (19 per cent), buying a first or replacement home (15 per cent), purchasing an investment property (8 per cent) or selling (6 per cent).

Buyers also identified opportunities to make lower offers (19 per cent), adjust deposit targets (17 per cent) and explore previously unaffordable suburbs (16 per cent).

McCann said uncertainty over whether conditions would improve was complicating purchasing decisions.

“But many buyers are worried about getting the timing wrong and are therefore weighing up whether prices could fall further, whether interest rates might move again and whether waiting could leave them in a better position.”

She also cautioned that cheaper homes would not, by themselves, resolve the persistent obstacles facing Australians seeking to enter the market.

“While recent falls in house prices will be welcomed by first home buyers looking to enter the market, we also know that housing affordability and availability remain a major long-term challenge for many.”

Changing the entry strategy

The survey also revealed that FHBs are widening their searches, with 74 per cent prepared to purchase somewhere they had not initially considered.

They were also the least likely group to reject properties over location concerns, at 22 per cent, including proximity to motorways, airports, flight paths or waste management facilities.

Property preferences have shifted too, with the proportion intending to buy a house falling from 64 per cent in 2021 to 53 per cent, while apartments and units increased from 17 to 29 per cent and townhouses from 7 to 19 per cent.

Further, another 41 per cent said they would consider rent-vesting: purchasing in a more affordable area while renting elsewhere.

Tax changes also attracted optimism, with 55 per cent believing the federal government’s negative gearing and capital gains tax reforms would benefit aspiring buyers, rising to 70 per cent among Gen Z.

[Related: Mortgage demand collapses as refinancing retreat gathers pace]