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Australians have the most pessimistic outlook on their prospect of buying a home almost since the 1980s as they are hit by a double whammy of rising house prices and rising interest rates.
But for those trying to time the market, next year might be even worse as moderate price rises are forecast and interest rates are expected to hold at current levels, or higher, for longer.
Australians are the most pessimistic about buying a home almost since the late 1980s.Credit: Peter Rae
Consumer sentiment on the ‘time to buy a dwelling’ measure dropped 3.7 per cent in October to 73.2 points, the latest Westpac-Melbourne Institute Consumer Sentiment Index this week found. It is an extremely weak read, in the bottom 2 per cent of observations, historically.
It is now the lowest since March, and before that since 1989, but has been in weak territory for most of the last year and a half.
Buyer sentiment is weakest in NSW, Queensland and South Australia – all of which have index reads below 70 points – but notably firmer in Western Australia, at 90.8 points.
Meanwhile, most consumers still expect prices to rise further over the next 12 months and interest rates to rise again, the index found.
Westpac senior economist Matthew Hassan said the expectation of higher rates and house prices tied into weak consumer sentiment about housing affordability and whether it was a good time to buy a home.
“The weak read started with the surge of prices and weakened further with the sharp rise in interest rates. It’s a double whammy for buyers and about as difficult as it’s ever been,” Hassan said.
Hassan said the index recorded the lowest read at 44.8 points in June 1989 when mortgage rates were at 17 per cent and the housing market was near the peak of an extraordinary price surge.
“So that was without a doubt the worst,” he said. “Outside of that it’s comparable with any other lows, and it’s been sustained for a long time now, we’ve been at these levels for the best part of 18 months now.”
It follows research showing mortgage affordability compared to incomes is the worst since mid-1990 after last week’s interest rate rise.
Hassan said Australians are typically positive about housing, and the long-running index average is 121.2 points.
“It takes a pretty extreme combination to be this negative about purchasing. We’ve seen this for 12 to 18 months and prices are still pushing higher.
“I don’t think it’ll get materially worse [next year] but it will remain extremely difficult, and clearly it’s a difficult situation for buyers.
“It’s going to be difficult and will stay difficult and there will not be much benefit either way if they pull forward or delay the decision. They have to be careful with the financial risk they’re taking on. It’s really the same story we’ve seen for over a year.”
AMP chief economist Dr Shane Oliver warned that next year could be an even worse time to buy for anyone hoping to time the market.
“Based on current forecasts, next year will be a worse time to buy. If prices keep rising even at a slower rate, then next year certainly won’t be a good time to buy,” Oliver said.
“But it begs the question whether the price forecasts are too optimistic, that the forecasting community might be wrong. The big surprise next year might be the weakness in the property.”
It is not clear that next year will be a better time to buy a home.Credit: Peter Rae
Oliver said this year’s boom was supported by a narrow pool of cashed-up buyers as prices rose off the back of low levels of sales and housing finance – a trend which could dry up next year.
“It’s unsustainable for prices to keep rising rapidly when consumers see it as not a good time to buy property,” he said.
Wakelin Property Advisory director Jarrod McCabe said people who are in a position to buy a home now should avoid timing the market.
He has earlier warned buyers to focus on choosing the right property, such as a home with strong underlying land value and a good orientation, rather than the right time.
“If you’re looking for a property that is quite unique, by trying to time the market you could be waiting six to 12 months. The market may have changed, and then you’ll be playing catch up,” McCabe said.
”If you want to wait until next year because your own personal circumstances will put you in a stronger position – but if that right property comes up before Christmas, then I wouldn’t hold off in the new year.
“Part of the problem is you may not find a property in the new year. It depends on everyone’s personal circumstances.”
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