Australia | Jan 22 2010
By Chris Shaw
Australian consumers remain confident in the outlook for property prices if an additional question in the January Westpac-Melbourne Institute Consumer Sentiment survey is any indication. The response showed a strengthening in the consensus view house prices will continue to rise.
In total 84% of those responding to the question see prices gaining over the next 12 months, with 21% of them expecting property prices will increase by more than 10%. This compares to 74% of respondents having such a positive view in the October survey, 53% in July and 33% in May.
Westpac senior economist Matthew Hassan notes only 3% of those responding expect property prices to fall in 2010, well down from around one-third of respondents in the May 2009 survey. This also shows a significant improvement from a Mortgage Choice run survey in November of 2008 that showed more than half of consumers at the time expected house prices to fall.
Hassan points out the spread of responses in the current survey suggests an average expected price rise of 5.4% for 2010, up from 3.9% in the October survey and 0.8% in last July’s survey. In every state expectations are for better prices, Victoria the most bullish at 87% expecting property prices to gain and 29% seeing these gains as being better than 10% for the year. The biggest rise in optimism occurred in New South Wales, where the proportion expecting prices to increase rose to 84% from 68% previously.
In age group terms, 18-24 year olds are most bullish on the outlook for property price gains, while 50-54 year olds and 25-34 year olds are slightly less optimistic. Hassan notes the importance here is these age groups are the key drivers of investor and first home buyer demand respectively.
The continued bullishness on the house price outlook comes despite three interest rate increases by the Reserve Bank of Australia in recent months and expectations of further increases in coming months, while there has also been a winding down of the Government’s first home buyer scheme.
Despite the positive price expectations Hassan notes affordability appears to be becoming more of an issue, as the question “Is now a good time to buy a dwelling?” saw a significant pullback in the number of positive responses.
