Consumer confidence has taken a dive in September, with confidence around the housing market continuing to erode amid soaring prices.
According to the Westpac –Melbourne Institute Consumer Sentiment Index, consumer sentiment declined 5.6% in September. This came as no surprise to Westpac’s chief economist, Bill Evans, who said the gloomy global and domestic outlook was likely to have played on their minds.
“This solid fall in the Index comes as no surprise. We were somewhat puzzled by the surprise increase in the Index last month of 7.8% and there was always likely to be some correction this month.
“Of course the deluge of disturbing news around violent gyrations in both Australian and overseas equity markets; poor economic data from China; a disappointing report on Australia’s growth rate and the weakness in the Australian dollar were also likely to have unnerved households.”
Looking at housing market confidence specifically, consumer sentiment around ‘time to buy a dwelling’ fell by 0.9%, to be 8.6% down on a year ago and a huge 30% lower than two years ago.
Confidence in the New South Wales housing market continues to underperform, dropping 14% in September to be 34% down on a year ago and 55% over the last two years. Within that index, Sydney sentiment is down 46% over the last year, reaching its lowest level since the survey began in 1975.
This is understandable, considering the latest home value statistics compiled by CoreLogic RP Data revealed that Sydney prices increased a further 7.4% in the quarter ending 31 August, to be up 17.6% year-on-year. Since the beginning of 2009, Sydney has recorded a cumulative capital gain of
At the same time, however, the Westpac –Melbourne Institute Consumer Sentiment Index also revealed that proportion of respondents favouring real estate as the wisest place for savings is the highest it has been since September 2003 – the last time Australia had an investor-led boom in property. Those favouring real estate increased from 24.6% in June to 28.2% in September.
“The increase in the proportion favouring real estate is likely to be capturing the improving optimism of investors in the housing market whereas the deteriorating prints on the ‘time to buy a dwelling’ index is probably reflecting affordability concerns of upgraders and first home buyers,” Evans explained.
“In that regard note that the Westpac – Melbourne Institute Index of House Price Expectations continues to point to rising prices, albeit at a slower pace.”