Nearly 7 in 10 consumers expect house prices to keep rising
New consumer sentiment data has shown a slight improvement in housing-related sentiment over the past month.
In the latest Westpac-Melbourne Institute Consumer Sentiment Index, mixed messages were visible as the “cost-of-living gloom continues”.
With “consumers deeply pessimistic and becoming more concerned about the economy’s near-term outlook”, general sentiment dropped by 1.8 per cent to 84.4.
Despite this, housing-related sentiment did see a slight overall improvement, with Westpac Group senior economist Matthew Hassan stating there has been another lift in the assessment of consumers regarding the amount of time needed to buy, while price expectations are holding “at optimistic levels”.
Over the last month, the “time to buy a dwelling” index rose by almost 5 per cent to 77.8 – a 15-month high.
Even so, Hassan acknowledged that the index is “still in a relatively weak, pessimistic range”, given the average over the full history of the survey sits up at 120.8.
The economist pointed out that buyer sentiment is far stronger in Victoria – at 84.3 – which he attributed to the “slight slippage” seen in Melbourne property prices over the past four months.
Up in NSW, the index sits at just 73.3 due to continued gains in property prices across Sydney, with Hassan also pointing out that the associated deterioration in affordability is “clearly weighing more heavily”.
When taking a closer look at house price expectations, the Westpac-Melbourne Institute Index of House Price Expectations “was essentially unchanged”, remarked Hassan.
In February, the index sat at 161.4 while dropping ever so slightly to 161.1 – a change of 0.2 per cent. It’s a far cry from the average index result throughout the years that the index has been measured of 126.5.
What that means is that nearly 70 per cent of consumers are expectant that house prices will continue rising in the year ahead.
Despite the positivity, real estate is still not being classed as a “safe haven” investment option by many Australians. As part of the index, every three months the survey will query the “wisest place for savings”.
Safe haven options continue to dominate, with three in five consumers looking to either pay down debt or place money in the bank.
In contrast, just 8.4 per cent of respondents said real estate is the wisest place for savings, which Hassan noted as remaining “very low compared to the long run average of 24 per cent”.
The findings come in the wake of the Reserve Bank of Australia’s (RBA) decision to keep the cash rate at 4.35 per cent following on from the March meeting.
Even with the next board meeting not taking place until May, Hassan expects “the board to again leave the official cash rate unchanged, provided inflation continues to track towards a return to the RBA’s 2 to 3 per cent target over a reasonable time frame”.
In conclusion, Hassan explained that “for consumers, the inflation and cost-of-living crisis may be becoming less acute, but it will likely remain the dominant concern for some time yet”.