Consumers’ concerns over an interest rate increase this year may have impacted a sentiment towards housing, a February survey from Westpac revealed.
Westpac’s “time to buy a dwelling” index sharply fell 7.8% on a month-on-month basis, from 100.9 in January to 93.0 in February this year. The index is at its lowest level since May 2010, when the Reserve Bank of Australia was near the end of its last tightening cycle, Westpac said.
“Victoria, Queensland and WA [Western Australia] all recorded 10% plus declines in the month although the NSW [New South Wales] Index remains the weakest across the states. The fall points to a shaky start to the new year for housing markets”
According to the report, most consumers expect house prices to rise. The Westpac Melbourne Institute Index of House Price Expectations rose 0.1%, holding on to last month’s 11% bounce.
“Over 64% of consumers expect price gains over the next 12 months compared to just 39% this time last year.”
The figures are higher for NSW and Victoria, where market conditions and price gains have been strongest – some 70% to 75% of consumer expects price increases, with one in ten expecting double digit growth.
Westpac said it expects the Reserve Bank Board to keep cash rates on hold when it next meets on 7 March. “Recent commentary clearly sets out the Bank’s current policy approach. That is, to hold rates steady in anticipation of a gradual lift in growth and inflation while imbalances in the housing market remain contained.”
“We expect this thinking will be sustained throughout 2017, being supported by a rising terms of trade, a peaking construction cycle and a gradually falling unemployment rate with rates remaining on hold,” it added.
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