Consumer house price expectations fall

From Westpac this afternoon, the quarterly consumer house price expectations survey:

• The Westpac-Melbourne Institute Consumer House Price Expectations Index moved lower in Jul from 53.9 in Apr to
46.9. That marks a softening in the upbeat expectation for prices although most Australians still expect house prices to move higher over the next 12mths.
• At 58.6%, the proportion of respondents expecting prices to rise remained an outright majority, down marginally on Apr’s 62% . A further 30% expect house prices to remain stable with 12% expecting prices to decline, up from 8% in the April survey. The up:same:down mix is significantly more positive than the 47:32:21 reading averaged in 2012.
• Although there is a clear consensus that prices will rise, few expect double-digit price growth with just 8% expecting a 10%+ rise. Dwelling prices often surprise though. Prices rose 3.9% in the year to Jun – a gain over half of consumers did not anticipate. Conversely prices were weaker than expected in 2011-12 with only 22% of consumers correctly picking the 2.6% decline.
• The state split showed some notable shifts. Expectations took a big knock in WA, falling from a very bullish +82 in Apr to a much lower but still positive +41 in Jul. This looks to be more than just a mining story with expectations in Qld tracking in the opposite direction (+15pts).
• Price expectations are now closely clustered with littleseparating consumer expectations in Qld, Vic and WA. Only
NSW stands out as more bullish on prices, with over two thirds of consumers in NSW expecting prices to rise.
• The Mortgage & Finance Association conducts a survey every 6mths that asks consumers about house price expectations over a shorter forward horizon (3mths). The responses shed some interesting light on the 2011-12 correction. They
show ‘short term’ price expectations did turn negative but, in contrast to 2007-08 and 2004-05, medium term price expectations remained in positive territory.
• It is unclear why 12mth price expectation were so well anchored through the 2011-12 correction but the fact that
they were may have limited price declines. Sellers would have been more inclined to de-list properties rather than accept low price offers and buyers would have been less inclined to hold off purchases in the hope of lower prices in the future. This anchor may be even stronger now that prices are rising again.
• Similar surveys of house price expectations in the US have also shown firming expectations of house price gains. Indeed, Australian and US consumers now have identical expectations for prices in the year ahead.

Er 20130712 Bull Consumer House Price Expectations