Australian continued to have a pessimistic outlook on homebuying this month despite the overall lift in consumer confidence.
According to the Westpac Melbourne Institute Consumer Sentiment Index, the time-to-buy-a-dwelling index fell 2.9% to 74.9, holding near cycle lows.
This index has remained in the “pessimistic” range of 75 to 80 for the past six months.
Westpac chief economist Bill Evans said the negative outlook persist due to affordability being key driver of this index
“The prospect of high prices is not always positive, particularly when interest rates are expected to move higher as well,” he said.
“The combination looks to be keeping homebuyer sentiment firmly in the doldrums.”
Mr Evans said the next decision of the Reserve Bank of Australia (RBA) would be crucial to the confidence of Australians towards homebuying.
“The December survey results show inflation concerns remain high amongst consumers and are not abating despite higher interest rates and a deteriorating economic outlook,” he said.
“We have also seen a sharp improvement in the outlook for house prices, a lift in confidence amongst respondents with a mortgage, and a significant improvement in consumers’ outlook for their finances.”
Westpac projections point to another 25bps hike in February, which would bring the cash rate to 3.35%.
Despite the decline in homebuying index, the overall consumer sentiment index increased 3%.
This recent growth followed the 6.9% drop in November, which saw the index collapsed to one of the weakest levels recorded outside of a recession.
One of the highlights of the overall consumer sentiment survey was the shift on the view on interest rates.
“When we asked respondents about the outlook for interest rates 50% of those surveyed after the RBA’s December decision expected the cash rate to increase by a further 1ppt or more over 2023 — that is down from 60% in November and a peak of 73% in July,” Mr Evans said.
“This shifting view on interest rates most likely contributed to a surprising lift in the outlook for house prices.”
In fact, house price expectations surged 27.6% in December, which was apparent across all major state housing markets.
Consumers are also more confident on their outlook for the general economy and the labour market.
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Photo by towfiqu ahamed barbhuiya on Canva.
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