- Australians think now is the best time to buy a home in over three years, encouraged by lower prices, especially in Sydney and Melbourne.
- Sentiment towards buying a home in New South Wales jumped to the highest level in five years.
- Australians still think prices will fall with sentiment towards the outlook for prices hitting the lowest level since May 2009.
Australians, collectively, think now is the best time to buy a home in over three years, encouraged by lower prices, especially in Sydney and Melbourne.
The ‘time to buy a dwelling’ index in the Westpac-MI Australian Consumer Sentiment report surged by 11.8% in November, leaving the index up a mammoth 16.7% on the level of a year earlier.
It now sits at the highest level since March 2015, led by a sharp increase in sentiment among those respondents in New South Wales, where home prices have fallen the fastest over the past 12 months.
“Consumers in New South Wales showed a particularly strong gain with a 26% jump taking the state index to a five-year high,” said Bill Evans, Chief Economist at Westpac.
Evans says this suggests recent declines have started to “generate some interest from buyers”.
Even with the burst of buying enthusiasm in New South Wales in the latest survey, Evans says sentiment towards buying still remains just below the long-run average.
So confidence has improved, albeit from very low levels.
In Victoria, home to the second-fastest falls in home prices this year, sentiment towards buying a home also increased, albeit by a far smaller margin.
“Victoria, where prices have recently shown significant weakness, improved only modestly by 3.3%,” Evans said.
Given that falling home prices in both states have started to attract buying interest, expectations for further price declines in these locations could see buyer sentiment improve even further in the months ahead.
Evans said the separate ‘House Price Expectations Index’ fell by 2.3% to 99 in the latest survey, equaling the weakest result ever seen since the question was first asked in May 2009.
“The state detail continues to show particularly weak reads in New South Wales and Victoria, both hitting new lows in November with Victoria’s index down 25% over the last three months alone,” he said.
“The house price corrections underway in Sydney and Melbourne now look to be firmly embedded in consumer expectations.”
So even with expectations for further declines — a view that mirrors forecasts from the vast majority of economists — an increasing number of Australians think now is a pretty good time to buy.
Of course, while sentiment towards buying a property has improved sharply, the main factor that any prospective buyers have to contend with at present is the ability to secure finance, at least for those who are looking to buy their first home or upgrade from their existing property, or for those carrying already high levels of debt.
More broadly, Westpac said its headline consumer sentiment index rose by 2.8% to 104.3 in November, the 12th consecutive month where optimists outnumbered pessimists in the survey.
“While confidence may still not be particularly strong, there has been a clear improvement over 2018,” Evans said, adding the improvement in the latest survey was largely driven by an “exceptional rise in longer-term expectations” for the economy.
“The ‘economic outlook over the next five years’ subindex jumped 9.7% in November to reverse most of the sharp drop seen over the previous three months,” he said.
“The ‘economic outlook over the next 12 months’ subindex posted a 1.7% rise, and, at 104.3, remains well above its long run average of 90.7.”
Sentiment towards current and expected family finances also improved from October, lifting by 4.9% and 3.2% respectively – the former to the highest level since early 2016.
“Consumers in New South Wales showed particularly strong gains, a somewhat surprising result given the continued correction in Sydney house prices,” Evans said.
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