30-Jan-2020 • Home Buying

Climbing house prices are yet to crush the home ownership dreams of first home buyers, with many more first home buyers intending to buy in 2020.

First home buyers’ hopes of breaking into the market have jumped dramatically, with half (51%) of first home buyers planning to buy property in the next 12 months, compared to 38% in Q2 2019.

That was the standout finding from ME’s fourth Quarterly Property Sentiment Report – a survey of 1,000 Australians in the property market – conducted in January, Q1 2020.

ME’s General Manager Andrew Bartolo said, “Rising property prices carry the risk of squeezing first-home buyers out of the market, however they also signal a healthier market that presents a worthwhile long-term investment.”

“In the case of first home buyers, the recent property price recovery has likely nudged them to get in while they can – as though it’s ‘now or never’ – and has created a sense of FOMO.”

“Low interest rates and commentary in the market for the support of first home buyers may have also contributed to an increase in home-buying intentions.”

Over half predict house prices will keep rising

Recent property prices across Australia’s key property markets aren’t expected to halt any time soon, according to Aussies in the property market.

Over half (55%) of respondents predict prices to rise over the next 12 months – a massive jump from the mere 38% who predicted price rises in Q3 2019 when the market first began to turn.

Strong house value growth is predicted by Victorians more than any other state; with 67% of Victorian respondents predicting prices to go up - a 10 percentage point jump from last quarter’s prediction, and a 34 percentage point jump from their Q2 2019 prediction.

All other major cities had a more positive outlook on prices than last quarter, including WA where last quarter more were predicting price falls than rises.

Positive house price expectations were seen across owner occupiers, first home buyers and investors.

Overall property market sentiment improves

The report shows sentiment towards the property market has improved for the third quarter in a row, increasing to net positive 21% (up 3 percentage points from Q4 2019, and up 14 percentage points from Q2 2019 when the report first started).

“Considering a combination of market factors including the buzz of home value growth, a solid spring selling season, plus rate cuts and signs from the RBA that rates will stay lower for longer, it’s no surprise overall property sentiment has improved,” said Bartolo.

Investor optimism has dipped slightly and is now on par with that of owner occupiers, as rising prices present a potential barrier to this cohort.

Spending habits take another hit

ME’s report revealed price positivity and overall market sentiment isn’t flowing through to spending habits.

Recent property price movements have negatively impacted ‘willingness to spend on discretionary items’ for another quarter in a row. It remains the only area of personal finances that has stayed net negatively impacted - sliding deeper from net negative 3% to net negative 8% over the past quarter.

All other areas of personal finances analysed such as sense of wealth, financial confidence, savings behaviour and debt situation, remain net positively impacted by recent price movements.

“Despite market positivity and a stronger sense of wealth, there’s less willingness to spend on discretionary items – a trend that bucks the wealth effect theory. Much broader economic dynamics are obviously at play,” said Bartolo.

Growing optimism eases financial worries, but affordability remains an issue

Growing optimism over the past quarter has eased most financial worries, but housing affordability still tops the list.

Ninety-two per cent of respondents agree that ‘housing affordability is a big issue in Australia’, up from 89% in Q4 2019.

ME’s report explored level of personal worry towards affordability, as well as acknowledgement of the issue, for the first time and found net 14% agree with the statement ‘I’m worried about property becoming unaffordable’ – making it the top worry.

All other perceived worries in ME’s report have eased to the lowest point since the survey began in Q2 2019.

Tight credit policies are becoming less of a concern with only net 6% agreeing it’s a worry (down from net agree 16% last quarter).

Concern over negative equity has dropped dramatically to net disagree 34% (from net disagree 12% last quarter), likewise, worry about being forced to switch to interest only payments also slid to net disagree 30% (from net disagree 12% last quarter).

Not enough choice in the market

The report also tracked the perception of choice in the property market and found almost half (46%) of total respondents believe there is not enough choice, with this figure jumping to 57% among first home buyers.

“Housing supply has picked up slightly, but with prices rising and demand outweighing supply, there’s no wonder that almost 1 in 2 Aussies don’t think there’s enough choice available,” said Bartolo.

“With so many first home buyers planning to buy in 2020, yet most stating choice in the market is a barrier, addressing this issue should be a focus in the year ahead.”


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 January 2020.

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