- Be it the outlook for prices or whether now is a good time to buy, Australians have suddenly become a lot more confident about where the housing market is heading.
- Views on whether now is a good time to buy a home rose to a four-year high in April, according to the Westpac-MI Consumer Sentiment Survey for April.
- Sentiment towards the outlook for prices also firmed sharply, although the slim majority remain pessimistic.
- Other housing indicators such as clearance rates, building approvals and housing finance have also improved recently. Home price falls have also slowed.
Be it about the outlook for prices or whether now is a good time to buy, Australians have suddenly become a lot more confident about where the housing market is heading.
According to the latest Westpac-MI Consumer Sentiment Index for April, sentiment towards both prices and purchasing rose strongly, adding to a lengthening list of housing indicators that have strengthened recently.
“Sentiment around housing improved in April,” said Bill Evans, Chief Economist at Westpac Bank.
“The ‘time to buy a dwelling’ index rose a further 2.4% to 119.4 in April, a four-year high. The index has now risen 33% from its mid-2017 low and is back around its long run average of 120.”
A reading of 100 indicates that the number of optimists and pessimists are the same. A reading over 100 — as was seen in April — indicates that most Australians believe now is a good time to buy a home.
Evans said falling home prices in New South Wales and Victoria, Australia’s most populous states which also have the highest median property prices nationally, have been behind the recovery in the index, helping to improve affordability levels for potential buyers.
“Improving affordability continues to see a lift in buyer sentiment in New South Wales and Victoria, although, in both cases, there is still some way to go before buyer sentiment returns to long run average levels,” he said.
The lift in the ‘time to buy’ index also coincided with a significant improvement in views towards the outlook for home prices in the latest survey, especially in New South Wales.
“The ‘House Price Expectations’ index posted a strong 11.9% rise to 95.6 in April, boosted by a sharp increase in New South Wales,” Evans said. “The index is coming off a March reading that was the lowest level since we began compiling this index in 2009.”
While pessimists still outnumber optimists when it comes the outlook for prices, it’s clear from the latest survey that sentiment is now looking a lot more balanced.
The Westpac survey also fits with a number of other housing indicators that have improved recently.
Auction clearance rates are slowly creeping higher, albeit from depressed levels, while home price declines have moderated in recent months, according to data from CoreLogic. Housing finance also increased in February, according to the ABS, snapping a recent downtrend, as did building approvals over the same period. Like clearance rates, the bounce in both of these series came from low levels.
Now, the disclaimer.
One month should not be relied upon to gauge a turn in market conditions, with similar results in the coming months required to solidify that view. However, evidence is mounting to suggest that trend change may be in the offing. Upcoming data will help to evaluate whether the downturn in the market may be close to bottoming.
As for the the reason behind the recent lift in housing indicators, there’s unlikely to be a definitive answer. But the improvement did take place in the same month the RBA stopped talking about lifting interest rates, adopting the view instead that the next move in Australia’s cash rate could be both up or down.
That subsequently lead to financial markets pricing in further rate cuts from the bank, something that has been widely written about in the Australian media.
In the past, Australians have become accustomed to RBA rate cuts being associated with higher property prices. This time may be no different, even before a possible rate cut is delivered.
The federal budget may have also played a role in the latest lift in housing sentiment the Westpac survey.
“The survey detail suggests the Budget was well-received,” Evans said.
“Sentiment over the course of the week showed a clear boost, with sentiment among those surveyed post-Budget 7.7% higher than sentiment amongst those surveyed pre-budget.
“[This was] the most positive turnaround since we began tracking pre and post Budget responses in 2011.”
The headline Westpac-MI Consumer Sentiment Index rose 1.9% in April to 100.7, indicating the prevailing view is optimistic, albeit by a minuscule degree.
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