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Home buyer sentiment has dropped to levels not seen since the 1970s, a major bank’s report has found.
The Westpac-Melbourne Institute Consumer Sentiment Index revealed that the “time to buy a dwelling” index fell 4.8 per cent to 72.8 pts in June, following a slight rise of 1.6 per cent in May.
According to the monthly survey, the “time to buy a dwelling” reading for June was in the bottom 5 per cent of readings recorded since the mid-1970s.
Home buyer sentiment saw the biggest decline in Western Australia, which fell by 20.5 per cent, followed by Queensland (down by 15.5 per cent) and South Australia (14.5 per cent). Notably, these capital city markets have recorded strong price gains over the last 12 months.
The report stated that the associated deterioration in affordability has taken home buyer sentiment to “extreme lows” with index reads in the 60–70 range. The index currently reads well below the survey average of 120.6 pts.
Conversely, the index for NSW rose 12.7 per cent to 81 pts in a “somewhat surprising” gain; however, buyer sentiment still sat well below the long-run average of 117.4 pts for the state.
Furthermore, the Westpac-Melbourne Institute Mortgage Rate Expectations Index surged 6.2 per cent to 141.2 pts, marking the highest reading since the beginning of 2024, with responses revealing that around half of consumers are expecting mortgage rates to rise over the next year.
While buyer sentiment weakened during the month, home price expectations rose to a new cycle high, the report found.
The Westpac-Melbourne Institute Index of House Price Expectations rose 1.7 per cent to 163.8 pts, “on par” with the peak recorded in early 2021.
Matthew Hassan, Westpac senior economist, said: “Interestingly, the biggest gain was in Victoria (6.4 per cent) where prices have been slipping lower since mid-2023.
“The decline[’s] clearly doing little to deter expectations, possibly even adding to them.”
Commenting on the Reserve Bank of Australia’s (RBA) recent statements of uncertainty following the June cash rate decision, Hassan said: “Much of this uncertainty relates to the consumer – both the extent to which current weakness in demand is guiding inflation back to the RBA’s 2–3 per cent target; and the extent to which consumers may lift spending as real disposable incomes improve in coming quarters.”
Hassan stated that the major bank expects the June quarter inflation update to confirm that weak demand is “still exerting disinflationary pressure”.
“That in turn should provide the RBA with enough comfort that potential upside risks are not materialising, meaning a rate rise is not needed,” he said.
[RELATED: Rate hike considered; rate cut was not]
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Adrian Suljanovic
AUTHOR
Adrian Suljanovic is a journalist on Momentum Media's mortgages titles: The Adviser and Mortgage Business.
Adrian has written for a range of titles under the Momentum Media umbrella such as IFA, Investor Daily and Lawyer’s Weekly before joining the mortgages team in 2022.
He graduated from the University of Wollongong in 2021 gaining a Bachelor of Communication & Media with a major in Digital & Social Media.
E-mail Adrian at: adrian.suljanovic@momentummedia.com.au