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Australian Real Estate Market: Confidence at 3-Year High as Spring Season Begins
Australia’s real estate spring sales season is beginning with consumer sentiment more optimistic than it has been in four years. This new confidence is a welcome sign for the Australian property market. According to the latest Westpac Consumer Sentiment Survey Index, homebuyer sentiment has jumped by 10.5% in the last six months. The “Time to Buy a Dwelling” sub-index is now 37% higher than it was a year ago.
Overall, Australian optimism is at a 3.5-year high, ending the second-longest period of pessimism since the Westpac survey began in 1974.
The Impact of RBA Interest Rate Cuts
This positive shift coincides with the third interest rate cut by the Reserve Bank of Australia (RBA) since February. The cash rate has dropped from 4.65% to 3.85%, and many retail mortgages are now in the 5.5% to 6.5% range.
This is having a significant effect on sentiment.
- Renters, many of whom are aspiring first-time buyers, are showing a large improvement in optimism, suggesting that cost-of-living pressures are easing.
- Those saving for a deposit may also feel that falling interest rates will give them a better opportunity to enter the Australian housing market.
- The “mortgage belt” has also seen a noticeable improvement in financial sentiment.
The Westpac analysis confirms that the RBA’s August rate cut has reinforced expectations for further declines. Just over half of consumers expect mortgage rates to be lower in a year’s time, a figure that rises to nearly 60% among those with a mortgage.
Australian Property Prices Rebound
With the RBA indicating there may be another reduction before Christmas, Australian property prices are starting to rebound in a similar fashion to the newfound optimism.
Specialist real estate researcher Cotality (formerly CoreLogic) has reported a sixth successive month of value gains nationally. Dwelling values rose by 0.6% in July, the same rate of growth seen for the previous two months. Prices have risen 1.8% in the past three months, the best quarterly result since June last year. On this trend, values could exceed 7% growth annually, surpassing predictions from most major banks and portals like Domain and realestate.com.au.
Stronger Wages and Financial Confidence
The positive vibes uncovered in the Westpac survey might also be influenced by more cash in Australians’ pockets. For the first time, the average weekly full-time wage has surpassed $2000, according to the Australian Bureau of Statistics (ABS). Adults in full-time work earned an average of $2,010 in May, representing a 1.7% wage growth over the past six months. The ABS says annual wage growth to May was 4.5%—a rise of $86.60 a week.
This surge in wages complements Westpac’s analysis, which finds that Australians are becoming less anxious about their finances. A sub-index called “Family Finances vs A Year Ago” has surged 6.2%, and an index forecasting expectations for the next 12 months is 5.2% higher.
What This Means for the Spring Market
The Australian property market is dependent on a handful of factors: confidence in the economy, security of employment, mortgage costs, and the affordability of prices. The Westpac survey shows Australians are feeling more optimistic about all of these factors, with a 7.6% rise in confidence for the next 12 months.
As we enter the spring selling season, the Director of Research at Cotality, Tim Lawless, summarizes the situation perfectly. He notes that the “influence of low supply, falling interest rates, and rising confidence” is being countered by “affordability constraints and lingering uncertainty.”
The spring market will be interesting to watch.
*The Westpac survey was conducted by OZINFO & DYNATA and is based on 1200 adults across Australia. It was conducted from August 11 to August 15.
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