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• MPA Online

The rising cost of living is deterring consumers from activity in the property market, the MFAA has said.

The latest Bankwest/MFAA Home Finance Index has found 37.5% of households believe they are worse off financially than 12 months earlier. The proportion of respondents who intend to be active in the property market has also fallen, down to 19.1% in May from 21.6% in January. The index indicated that more housholds believe their financial conditions have worsened compared to those who believe they have improved, the weakest result since November 2008.

The index also surveyed consumer expectations of house price growth, and found 36.3% though prices would remain flat in the coming year, while 28.8% believed prices would rise and 34.9% expected prices to decline. Most households believe the RBA's monetary tightening is not over, with 68.7% indicating they expected rates to move higher over the next year. MFAA CEO Phil Naylor said the survey indicated high rates were a factor in dampening consumer confidence.

"The other key message from our survey is that households are still wary of higher interest rates, despite the fact that they are already doing it tough financially. It appears that people are feeling some financial pain at present but they are also anticipating things might get worse before they get better, and this cycle will need to be broken in order for the housing market to show signs of life," he said.

The number of households struggling to meet mortgage repayments has also grown, reaching more than one in four (25.7%), up from one in seven in previous polls. In spite of the difficulties households say they are facing, 68.2% of borrowers are still meeting repayments, while 5.2% said they have repaid late and less than 1% indicated they were behind on payments.

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