Consumers more pessimistic on housing market

by Miklos Bolza18 Apr 2017
Confidence in the housing market has dropped with Australians feeling more pessimistic about whether to purchase property, a new survey has found.

The latest Westpac – Melbourne Institute Survey of Consumer Sentiment found that the ‘time to buy a dwelling’ index fell from 99.6 to 96.3 between March and April this year.

An index of 100 refers to a balance of optimism and pessimism in the market while anything less than this refers to unfavourable buying conditions and a higher weight of pessimism.

“The fall in April reflected large falls in the two major markets – Sydney and Melbourne – partially offset by solid gains in Brisbane and Perth. Clearly affordability factors were behind this divergent response,” said Westpac’s chief economist Bill Evans.

Comparing yearly trends, consumers were still more optimistic about purchasing a dwelling now than they were in April 2016 when an index of 95.1 was recorded.


The Westpac – Melbourne Institute Index of House Price Expectations for April also fell by 1.1 which may reflect new policies from regulators to slow house price appreciation.

“In that regard it is worth noting that in the year to April 2016, in the aftermath of the previous round of regulatory and interest rate changes the Index fell by 16%. Since the Reserve Bank’s rate cuts in May and August 2016 the Index has lifted by 19% to be back near previous highs.”

With the board of the Reserve Bank due to meet next on 2 May, Evans said rates were certain to be kept on hold.

“As discussed previously the Board is concerned about excessive household leverage which has been boosted by rising house prices. While this concern might be alleviated by a rate hike the real economy is in no shape to deal with higher rates.”

With a stagnant labour market, below-target inflation levels, and a lack of consumer confidence, the authorities are opting for a policy mix of steady official rates and greater regulatory controls, Evans said.

“As noted with our House Price Expectations Index, these regulatory controls – complemented by increases in banks’ rates – have been successful in easing conditions in the housing market in the past.”

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