Stephanie Chalmers| MSN Money| 14 November 2018
Australians think it is the best time to buy a house since March 2015, led by a leap in NSW consumers thinking now is the time to snap up a property, according to Westpac economists.
The bank’s monthly consumer sentiment survey posted an 11.8 per cent surge in respondents thinking it is the right time to buy a dwelling — that is nearly 17 per cent higher than a year ago.
Consumers in New South Wales showed the biggest turnaround, with the state’s ‘time to buy a dwelling’ index surging 26 per cent to a five-year high.
“[This suggests] the decline in Sydney house prices is starting to generate some interest from buyers,” said Westpac chief economist Bill Evans.
However, the NSW surge comes off a low base, with Mr Evans noting that the “stunning improvement” only restores the index to just below its long-term average.
It follows the continued sharp slide in national house prices, which have now fallen 3.5 per cent over the past 12 months — the largest annual decline in six-and-a-half years.
Consumers surveyed by Westpac are anticipating further falls, with expectations of house prices declining by 2.3 per cent, to equal the weakest level on the survey’s record.
“The state detail continues to show particularly weak reads in NSW and Victoria, both hitting new lows in November with Victoria’s index down 25 per cent over the last three months alone,” said Mr Evans.
“The house price corrections underway in Sydney and Melbourne now look to be firmly embedded in consumer expectations.”
Would-be buyers seeing price falls as opportunity
Some economists see the surge in consumers thinking it is the right time to buy as a sign the property price declines are being viewed as an opportunity to get into the market.
“Some Sydneysiders appear to see some upside to falling home prices due to better affordability,” said CommSec senior economist Ryan Felsman.
IFM Investors chief economist Alex Joiner agrees and sees current property price declines as a “true improvement” in affordability for first home buyers in particular.
“I think modest price falls will continue for some time yet but this is a positive sign,” he said.
Despite perceptions of affordability improving, Mr Joiner expects difficulties accessing credit to put a dampener on some buyers.
“Anecdotes suggest the mortgage application process has become much more onerous in the wake of the regulator’s actions and the banking royal commission,” he said.
It’s harder to get a loan and borrowers are getting less than they used to be able to — that’s a good thing for financial stability, but does create some downside to property prices.
“This is now being observed in the hard data on housing finance approvals also.”
The latest data from the Australian Bureau of Statistics reaffirmed the downtrend in home loan approvals.
The total value of new loan commitments by owner-occupiers fell more than 4 per cent in September.
In addition to more difficulty accessing credit, expectations of further price falls ahead could keep potential buyers from taking the plunge in the near-term.
“If price declines become entrenched then upgrading buyers — those that sell to buy — may sit on the sidelines,” said Mr Joiner.
“First homebuyers might also be more patient if they think they can get a better deal.”
Consumers not planning to spend big this Christmas
Westpac’s survey also showed an improvement in the general confidence of consumers, with its sentiment index rising 2.8 per cent in November.
Westpac’s chief economist Bill Evans said it was a “surprisingly strong” result in light of the house price declines.
“In particular, respondents are much more positive about their own finances,” he said.
“That is despite consistent reports around weakness in the housing markets in the major capitals and the sharp falls in the equity market through October.”
However, the more upbeat assessment of household finances looks unlikely to translate into increased spending, with a measure of whether it is time to buy a major household item falling to an 18-month low.
Christmas spending expectations are also subdued, with a third of survey respondents expecting to spend less on gifts than they did last year and 56 per cent expecting to spend about the same.
“Despite the higher reads in overall confidence [this] suggests that we are unlikely to see any improvement over last year’s lacklustre Xmas spend,” said Mr Evans.