23-Jul-2019 • Personal Finance

Australians in the property market have become more optimistic about house prices over the next 12 months.

That was the standout finding from ME’s second Quarterly Property Sentiment Report, conducted at the start of July 2019, notably after the Federal Election, APRA’s announcement of serviceability changes, and two RBA cash rate cuts.

Positive house price expectations

Expectations for house prices over the next 12 months have become more optimistic, with only 17% expecting them to fall (28% in April), compared to 38% expecting prices will rise (32% in April), and 30% expecting them to stay the same (29% in April).

Respondents across all major cities had a more positive outlook on prices; significantly more people in NSW, VIC, QLD are predicting prices to go up, and noticeably more people in NT, TAS, NSW and VIC are predicting prices will no longer fall.

Positive house price expectations were also seen across all property status types, with owner occupiers changing their tune the most since April.

ME’s Group Executive Customer Banking, Craig Ralston said “Australians in the property market have become more optimistic about house prices, perhaps reflecting a number of changes in the external environment since the last survey.”

Worries ease; yet housing affordability and credit tightening still top the list

People in the property market still have their worries.

Housing affordability remains the top worry with 93% agreeing that ‘despite price falls in some areas they still think housing affordability is a big issue in Australia’, up from 88% in April.

“House prices remain high by historical and international standards, hence perceived worries about affordability may take time to shift,” said Ralston.

Encouragingly, all other perceived worries queried in the report have eased over the past 3 months; concern about tighter credit policies (10 point drop), concern over negative equity (7 point drop), and worry about being forced to switch to interest only repayments (7 point drop), and worry about property values falling (5 point drop) all eased.

“Reduced concern is likely connected to the increased sense of optimism about house prices,” said Ralston.

On another positive note, Australians in the housing market see price movements as a growing opportunity; 61% said they were happy property prices are falling (up from 59%) because it increases their chances of buying a property, with more first home buyers happy with recent price movement than other cohorts (86%).

Property intentions

The report finds more people are sitting on the fence when it comes to transacting property; less are intending to buy (down 3 percentage points), less are intending to sell (down 1 percentage point) and more people intend to do neither (up 5 percentage points).

The most likely buyers are unsurprisingly higher income earners (45% of those earning over $125,000 intend to buy). While many 25-39 year olds were also poised to buy in April, they’re no longer as eager, with only 44% now intending to buy, dropping from 52%.

In terms of property intentions by property status, 44% of investors, 42% of first home buyers and 24% of owner occupiers intend to buy in the next 12 months.

“There are more fence sitters who appear to be taking a ‘wait and see’ approach to the market – which is not surprising considering the recent economic and political changes,” said Ralston.

Overall, property sentiment remains stable

The report still shows a polarised market with 41% feeling neutral about the property market, 33% positive and 26% negative.

However, overall property sentiment remained stable, in a net positive position.

Sentiment varies by age, property status and property intent, with younger people and investors feeling less positive (8 and 4 percentage points less respectively) about the market than in April.

Whereas, owner occupiers and ‘those intending sell in the next 12 months’ are feeling more optimistic.

“The housing market has seen a moderation in the rate of house price decline in Australia’s key property markets over the last 3 months.

“Positivity among sellers and owner occupiers suggests these groups see the recent market trends as a sign their homes are retaining or regaining value again.

“The drop in positive sentiment among investors is surprising considering negative gearing now seems to be off the table and APRA has proposed changes to home loan serviceability.”


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 first survey was conducted at the Start of July 2019.

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