Sentiment towards housing in Australia is weakening, and fast.
According to the latest Westpac-Mi consumer sentiment survey released today, an increasing number of Australians think that it’s no longer the right time to buy a house right now, with expectations for house prices also taking a hefty hit.
“Confidence in housing was jolted in May,” said Westpac’s chief economist Bill Evans.
“The ‘Time to buy a dwelling” index fell by 6.5% in May from 96.3 in April to 90.0 in May.
This chart from Westpac shows the scale of the decline compared to levels seen in recent years.
“Apart from one reading in 2010 this is the lowest print for this Index since 2008 when house prices were falling and the Reserve Bank was raising the cash rate.”
According to Evans, it’s likely that tighter conditions for bank lending, rate increases for investors, along with the spectrum of initiatives in the Budget to discourage housing investors, was responsible for the sizeable drop.
And expectations for house prices may have also played a part, says Evans.
“Consistent with that response sentiment towards house prices also took a substantial hit. The House Price Expectations Index fell by 8.7% with big falls concentrated in New South Wales, Queensland and Western Australia.”
Though that may have been impacted by the factors listed by Evans above, the sharp drop follows news that Australian capital city house prices — including in Sydney and Melbourne — have started to weaken over the past month.
According to data released by CoreLogic earlier this week, prices in Sydney, Melbourne, Adelaide and Perth had fallen by 1% or more over the past four weeks, leaving the weighted decline across Australia’s five mainland state capitals at 0.9% over the same period.