Aussies are bullish about house prices after COVID

by Mike Wood01 Mar 2021

A survey released by ME Bank has revealed that Australians feel significantly more optimistic about their financial outlook going into 2021, despite the pressures of the COIVD-19 pandemic.

ME’s Household Financial Comfort Report showed that half of owner occupiers thought that the price of their homes would go up in the next year, twice the number who felt that in June 2020.

Investors also felt that their properties would accrue value in the next twelve months, with almost 40% expecting a gain in price. 

Jeff Oughton, ME Bank’s Consulting Economist, said that the post-pandemic feeling and government intervention had seen confidence rebound.

“Now that the recovery is underway, we’ve seen that spill over into more comfort with investment and into the property market. Financial comfort has actually moved up a little bit further, to a new record.”

“The main drivers of financial comfort is income and cash savings. Both give you a buffer against unexpected financial emergency. But as you become wealthier, for example those who own a home, you have better levels of comfort. There’s record levels of comfort among those with mortgages and paying off their home loan.”

“Those with mortgages find themselves with record low borrowing costs, income support from the government and the ability to either defer or refinance their loans. They’ve got record levels of comfort. We’ve only been asking about mortgage stress for the last few years but it’s at its lowest level since the survey began to collect that data.”

“You can see that in the environment of low interest rates and high levels of cautionary savings, where it’s cheaper to buy than to rent and now that you think the recovery is underway, why buyers have got very bullish about the property market.”

“Those households that own their home outright, they typically have the highest levels of comfort and have had a bigger boost in the last 6 months to their financial comfort. They’ve got much higher than those with a mortgage and those who are renting. I think it’s because, in periods of stress, the fact of owning your own home feels good.”

It isn’t all looking up, however. Those lower down the property ladder are still wrought with uncertainty.

“When you look deeper into it, what you see is that it’s not for all,” said Oughton. “The government has already begun to withdraw and or end support, and in those places, their comfort is falling. They’re faced with lower incomes and a still very tough labour market, and still some uncertainty about what’s happening with COVID.”

“You’ve got some households, a majority of households, at record levels where they’ve boosted their comfort because of government support, changing in cautionary behaviors and bullish views on property markets and the recovery of equity markets. But some households are unemployed or casual workers, they face a tough labour market and government support is being withdrawn.”

Oughton identified certain groups that continue to struggle for financial confidence.

“The biggest loser in the last six months was when the free childcare was ended and comfort of single parents with pre and primary school kids fell 14%,” he said. “And the other losers were the casual workers: 25% of casual workers are looking for more work.”

“And the unemployed, because 50% of Australians say that it’s difficult to find a job. Those with low comfort, typically low income with little to any savings, they’re still struggling. There’s a difficult labour market, uncertainty around COVID and the government about to withdraw the unprecedented support that they got during those six months to December.”