A growing number of Aussies feel as though the prospect of buying a home is slipping out of reach, amid expectations property prices will continue to grow in the year ahead.
But while price growth expectations appear to be cooling in some booming states, sentiment has jumped in one underperforming market as buyers anticipate a property catch-up.
That's the findings of the latest Westpac-Melbourne Institute consumer sentiment survey - a wide-ranging survey that asks borrowers how they feel about the economic outlook, their family finances and the housing market.
The headline Consumer Sentiment Index rose 1.2% to 91.6 for March, from 90.5% in February, though consumers remain firmly pessimistic, with a reading of less than 100 indicating pessimists outnumber optimists.
But the picture was mixed in the housing sections of the survey, with Westpac's head of Australian macro-forecasting Matthew Hassan noting "tension between bullish house price views and weak homebuyer sentiment."
Borrowers were asked how they felt about housing and finances. Picture: Getty
Home price expectations pick up in Vic, ease in red-hot states
Westpac’s house price expectations subindex - which asks consumers whether they think house prices will rise or fall over the next 12 months - dipped 1.7% to 171 in March from a fifteen-year high in February, remaining well above the long-run average. A reading of 100 signals price growth expectations are flat.
Mr Hassan noted a convergence between states as the heat came out of some red-hot markets.
The largest lift in home price expectations was seen in market laggard Victoria, while price expectations in the nation’s fastest growing states by price – Queensland, Western Australia and South Australia – pulled back.
Expectations for Victoria have been subdued on the index in recent months, though price expectations for the next 12 months picked up 5% to 168 in March. It comes despite February’s rate rise and the resurgence of high inflation across the nation.
The findings are a strong reflection of the long-awaited home price uptick the state has been waiting for.
Additional investor taxes, lockdowns and mass resident exodus from Victoria during Covid saw it plummet from the second-most expensive state to one of the cheapest.
The PropTrack Home Price Index shows the median price of a property in Victoria is up 7.2% on last year. Melbourne is also rebounding slowly, having posted annual median price growth of 3.4% over the last 12 months.
Despite this, Melbourne has seen less growth in the last year than every capital city.
Prices in Melbourne have been struggling. Picture: Getty
On the flip side, the states that have recorded the strongest growth in recent years have recorded a pullback in price expectations.
"States where the Index [of House Price Expectations] stood above 180 in February saw the largest index declines in March," Mr Hassan said, noting a 5% fall in Queensland, 6% fall in South Australia and 8% fall in Western Australia.
Sentiment cools in QLD, WA and SA as buyers feel priced out
When asked if they viewed now as a good time to buy a dwelling, consumers remain firmly pessimistic.
"The ‘time to buy a dwelling’ index declined a further 1.3% to a new cycle low just over 15% below the most recent peak in August last year," Mr Hassan said.
At 82.9, the latest read is more than 36 points below the long-run average of 120.
Homebuyer sentiment fell 5% to 76 in Queensland and dropped 15% in WA to what Mr Hassan called “an exceptionally weak level” of 65.
Property prices in Perth are 19.5% higher than they were 12 months ago, and 14.9% higher in regional WA, significantly outstripping every other capital city.
The continued strong price growth has also been weighing heavily on affordability in Queensland, with home prices in up 15.9% in Brisbane and 13.4% in regional parts of the state.
Supply shortages across the nation are a major cause for concern and are also contributing to generally lower sentiment.
The latest Home Ownership Report from Westpac shows more than quarter first-home buyers are feeling challenged finding a home that’s suitable for their needs, with a lack of listed properties holding them back.
That sentiment has jumped 14 percentage points since 2019.
“Young Australians are eager to get into the property market, but the reality is limited supply is creating significant challenges,” Westpac chief executive of consumer Carolyn McCann said.
The Reserve Bank cut rates three times last year. Picture: Christian Gilles
“The most critical focus has to be on supply. We need to build more homes at the right price point so that every Australian feels they have a chance to own their own home.”
The survey also showed Aussies are feeling more risk-averse than last year, with real estate billed as a ‘risky’ choice for how to spend savings – 9.2% down from 10.7% in December.
Instead, the index shows consumes would rather focus on paying down debt and holding wealth in bank deposits.
Rate hikes ahead?
Escalating market volatility from the unrest in the Middle East is also impacting on how Australians are feeling, Westpac found.
Westpac chief economist, Luci Ellis. Picture: Supplied
Markets are anticipating the RBA will hold off pushing rates even higher next week until the inflationary effects of oil price shocks can be fully assessed.
Despite this, Westpac has forecast in a 0.25% increase to the cash rate on 17 March.
“This is a change from our previous view,” chief economist Luci Ellis said. “The effect of higher oil prices on headline inflation is large but temporary but the RBA monetary policy board will nevertheless feel compelled to react, especially given the hit to confidence and financial markets has so far not been severe.”
NAB has also updated its rate hike forecasts to both March and May.
ANZ and Commonwealth Bank have not forecasted a hike until May.
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