Housing market sentiment marginally up despite broader fears of weakening economy: Westpac

Consumers think now is the time to buy a house and expect modest house price increases, despite general ill feelings about the economy, a new report has shown.

The Westpac sentiment survey reports a “disappointing” drop in general consumer sentiment and a less enthusiastic than usual response to Reserve Bank rate cuts within the housing market, Westpac senior economist Matthew Hassan said.

“Housing-related sentiment showed a clear response to the lowering in interest rates, although again some of the gains were more muted than seen in past rate cuts,” he said.

The time to buy a dwelling index showed a 1.8 per cent rise to 116.9 points, which was considerably lower than the 10 per cent-plus surge after the 2016 cut.

Price expectations soared, but it was still not enough to signal significant potential price rises.

The house price expectations index recorded a “spectacular” 22.7 per cent rise, Mr Hassan said. “This is the highest level since August 2018 but still well below the long-run average.”

The RBA last week cut rates to a historic low of 1.25 per cent. This, combined with a federal Coalition victory and a potential easing of lending standards, was expected to lift market sentiment.

Even in light of this muted response, Domain economist Trent Wiltshire said these results were the early signs of a market turnaround.

“The combination of the house price expectations index and the time to buy a dwelling index suggest consumers think prices are at or close to the bottom,” he said. “Having said that, the house price expectation indicator is below its long-term average.

“Because it’s below a long-term average, it suggests there won’t be a big rebound.”

Mr Wiltshire said the sentiment result also indicated the rate cut would also fail to rally housing prices.

“The rate cut will likely give the market a boost, but it will probably be more muted than in the past,” he said. “Bank lending practices remain tight, the economy is pretty weak, and housing affordability is still a problem, despite the correction.”

Agents suggest the Coalition’s victory, and subsequent rate cut had fuelled a wave of positivity from buyers.

“The market in Sydney has been really strong; there’s been a noticeable uplift in buyer sentiment post-election,” Damien Cooley of Cooley Auctions said. “I think there’s a strong possibility that prices are increasing.

“They won’t move quickly, but there is change, and that change is positive.”

In Melbourne, Marshall White director John Bongiorno said he saw the sentiment survey reflected in the market.

“I think it’s spot on. The market has absolutely seen an uplift since the election,” he said. “People feel it is a good time to buy given the discount the market received over the past 12 months.

“People are still cautious, but the lift has been fair. Not through the roof, not over the top.”