Australian property buyers are confused and at odds with themselves. That’s the message embedded in the RP Data – Nine Rewards Consumer housing market sentiment survey.
While on the one hand 66% of respondents “felt that now was a good time to buy a property”, RP Data also reported that “The survey also asked the question about whether Australia’s housing market was vulnerable to a significant correction. More than two thirds (68%) of respondents felt that it was, which was the highest reading we’ve received for this question.
“More than half of all respondents in each region felt that the housing market could see a significant correction.”
Interestingly the survey showed that even in Sydney and Melbourne, “where values have recorded the greatest surge over recent years, the proportion of respondents that felt the market was vulnerable to a significant correction was right around the national figure at 68.6% and 67.3% respectively.”
In psychological terms, the holding of opposing positions such as this is known as cognitive dissonance. Think smokers knowing that their habit could kill them.
From an economic point of view the simultaneous holding of a positive and negative view might help explain why Australian households are not spending the “wealth effect” in the manner that they have in the past and in the way the RBA expected.
It is also important for the outlook for housing as it suggests locals might be tiring of the price appreciation in Sydney, suggesting a further pullback in the rate of upward appreciation.
Equally belief a significant correction is possible is likely to adjust buying behaviour and undermine the number of people who genuinely believe now is a good time to buy and, as demand erodes, leading to the very thing Australians fear.
Certainly survey respondents don’t appear to be looking for a crash anytime soon with RP Data saying that, “Survey respondents felt that home values were likely to either increase (45%) or remain stable (43%) over the coming year with only 12% expecting a fall.”
But the overall recognition that a correction is possible points to enduring Australian consumer caution as a core part of the the economic landscape.