13-May-2021 • Home Buying

Despite record low interest rates, affordability and supply issues appear to be dampening the overall mood of Australian homebuyers. That was the key finding from ME’s latest Quarterly Property Sentiment Report.

Following record high sentiment during the first quarter of 2021, the overall sentiment of buyers and sellers in the residential property market dipped seven percentage points to 42% in the past three months.

Among buyer groups, first home buyers recorded the lowest level of positive sentiment this quarter, down three percentage points to 24% (five percentage points lower than the same time last year), while investors recorded the highest at 52%.

ME’s Head of Home Loans and Personal Banking, Claudio Mazzarella said, “when property prices and interest rates lowered last year during the pandemic, a unique buying opportunity opened up for confident first home buyers with cash savings and secure employment, while many investors became nervous.

“Now prices have rebounded strongly and affordability is going down, first home buyers aren’t feeling as positive.”

Supply concerns adding to the overall sentiment fall

Contributing to a decrease in positive sentiment this quarter is a fall in the perceived availability of residential property.

Overall, 60% of survey respondents believe there ‘isn’t enough choice in the current residential property market’ − a 17 percentage point increase since January.

More regional buyers believe there ‘isn’t enough choice’ (65%), especially in regional New South Wales (71%), compared to metropolitan buyers (57%).

“With more city dwellers moving to sea or tree change areas, supply is dwindling and adding pressure to prices,” said Mr Mazzarella.

Affordability a key issue

Overall, 91% of survey respondents said ‘housing affordability is a big issue in Australia’ − rising to 93% among first home buyers.

Affordability concerns are likely being compounded by expectations for further house price growth, with around 67% of those in the residential property market ‘expecting prices to increase in their area during the next 12 months’ - a 13 percentage point rise since January this year.

While first home buyer sentiment is down, investor sentiment is up

While rising prices are dampening their mood of first home buyers, the effect on existing owners is the opposite.

“Rising prices are making property owners feel wealthier, when many buyers are stretching their budgets to afford the limited but growing availability of stock on the market at the moment,” he said.

Property owners’ ‘sense of wealth’ and ‘general financial confidence’ increased to the highest levels since ME’s survey began in April 2019 – at 41% and 42%, respectively.

In contrast, an overwhelming 82% of the property buyers surveyed said they ‘feel worried about paying too much for property in the current market’.

Who’s planning to buy and sell?

In terms of buyer groups, more first home buyers this quarter said they are looking to purchase property in the next 12 months (52%), followed by investors (40%) and owner occupiers (21%).

Investors appear to be looking to cash in on high prices, with 23% indicating they want to sell their property in the next 12 months, compared to only 11% of owner occupiers.

By location, Sydneysiders are more likely to buy (38%) and sell (13%) in next 12 months than Victorians (32% and 10%, respectively).

“Although overall sentiment is lower among first home buyers, our findings show they are still the eager to buy property over the next year.

“There’s also a sense of ‘fear of missing out’ in the current market, which can be a key driver for this behaviour,” said Mr Mazzarella.

ME’s findings revealed over half (58%) of those looking to buy ‘feel a sense of FOMO’ (fear of missing out) in buying property in the current market.

Around 75% of those ‘looking to buy’ said ‘record low interest rates have made buying or investing in property more attractive to them.”


Editor notes: ME’s Quarterly Property Sentiment Report is based on national survey of 1,000 Australian adults in the property market (i.e. investors, owner occupiers and first home buyers). The survey is designed, developed and produced quarterly by industry super fund-owned bank ME with fieldwork conducted by Pure Profile. This edition presents the findings from the ninth edition conducted in April 2021.

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