The latest Commonwealth Bank/Mortgage & Finance Association of Australia (MFAA) Home Finance Index has revealed that Australian households are experiencing their highest levels of financial confidence since May 2011.
According to the index, overall sentiment increased to 90.6, up from 84.0 in March 2012 and well above the September 2011 low of 73.5.
More than three-quarters (75.8%) of the 1,423 respondents expect that house prices will grow or remain stable to the end of the year, up from 67.3% in March and 53.6% in the third quarter of 2011.
By contrast, the number of respondents expecting house prices to fall over the next quarter has declined from to 24.2% from from 32.7% in March and 46.4% in the third quarter of 2011.
As shown by the below chart, sentiment is highest in Western Australia and lowest in South Australia:
As expected, the MFAA chief executive, Phil Naylor, is putting a positive spin on the results:
“All of the signs are for a recovery of the property market, with Western Australians the most optimistic of the states, followed by people in NSW. The property market is all about confidence and the survey confirms that good times are ahead, especially as interest rates continue to fall”.
However, there is a big sting in the tail in the survey results, with confidence amongst first-home buyers (FHBs) waning:
The survey also found that the proportion of first-time buyer respondents who believe it is a good time to buy a new home fell from 51.7% in March to 42.4% in September, with anxiety regarding servicing a large debt if a property were purchased the primary concern of first-time buyer respondents rising to 71%, up from 69.2% in the last quarter.
Slightly more first-time buyers are placing buying a home on hold due to the payments and level of borrowing required (56.2% vs. 54%), and delaying their first-home purchase due to economic uncertainty (43.4% vs. 40.0%).
Of those first-time buyers who say it is a good time to buy, they are encouraged because prices are low and rates are down…
Only around 40% of first-time buyers in NSW, Victoria and South Australia believe it is a good time to buy their first home.
As noted previously, FHBs, along with investors, are key sources of new housing demand and chief enablers of the upgrader market, since upgraders typically sell to FHBs or investors. If confidence and demand from FHBs falls, then it will likely have flow-on effects up the chain, adversely affecting demand from trade-up buyers and overall house price growth.
Given the hit to FHB confidence, the survey seems to paint a mixed picture of home buyer confidence, rather than the unequivocally positive result proclaimed by the MFAA chief.
Twitter: Leith van Onselen. He is the Chief Economist of Macro Investor, Australia’s independent investment newsletter covering trades, stocks, property and yield. Click for a free 21 day trial.
