Genworth Financial has today released its Homebuyer Confidence Index for July, which registered a 7.1% increase in overall homebuyer confidence between March 2013 and July 2013, from 93.4 to 100.1. First Home Buyer confidence also rose significantly to 99.9 from 85.9 in March 2013.
Increases in confidence were recorded across all the major states, with New South Wales leading the rise and Western Australia lagging on account of concerns over the mining slowdown (see next chart).
The Genworth Homebuyer Confidence Index (HCI) is based on five components:
- The proportion of monthly income used to service debts;
- Their repayment expectations for the next 12 months;
- The maximum loan-to-value ratio (LVR) borrowers are comfortable borrowing;
- Whether they consider now a good time to buy a home; and
- Their repayment history over the last 12 months.
According to the report:
The biggest change in Index factors between March 2013 and July 2013 was in homeowners’ perceived ability to repay in the next 12 months, with the proportion who expected financial hardship having decreased from 27% to 17%, and more than half expecting to overpay…
The increase in FHB confidence was also driven by a positive outlook. Nearly nine in 10 FHBs expect to be able to easily meet or overpay their mortgage repayments in the next 12 months (86%), compared with 59% in March 2013…
Increased optimism surrounding borrowers’ ability to repay their mortgage is likely driven by the Reserve Bank of Australia’s (RBA) cash rate cut in May 2013, by 0.25 basis points. This saw the official interest rate and average three year fixed standard variable rate, as reported by the RBA, fall to historic lows of 2.75% in May 2013 and 5.15% in June 2013 respectively…
There is a general expectation that the RBA will make further cuts to the cash rate in the second half of 2013, which may be heightening borrower confidence about their ability to pay down debt…
The proportion of surveyed homeowners who would be comfortable borrowing more than 80% of the property value also increased from 28% in March 2013 to 32% in July 2013, back to 2012 levels…
While homebuyer confidence is up overall, it’s not all roses, with many would-be buyers still locked-out of the market by high prices, while many are also concerned about deteriorating economic conditions:
Housing affordability ( 34%), followed by the difficulty to save a deposit (26%), were the biggest barriers to homeownership among prospective FHBs. Around half of surveyed prospective FHBs would enter the property market earlier if property prices decreased (49%)…
Four in five surveyed non-property owners said they are unable to raise a 20% deposit for a $500,000 house (80%), 47% said they are concerned about unemployment, and 38% indicated concern about rising living costs. One in four prospective FHBs have not yet bought a property because they have not secured enough money for a deposit (25%), while around one in three reported they would enter the market earlier if they could secure enough money for a deposit (35%), or did not need to save a deposit (34%)…
There is a perception among non-property owners that they are locked out of homeownership. Over half of surveyed non-property owners did not believe they would qualify for a mortgage (58%)…
Around half of surveyed prospective FHBs believed the Australian economy was heading in the wrong direction (51%), compared to only 39% of current homeowners…
The Australian dream of homeownership was considered unrealistic among most non-property owners (70%) and current homeowners (65%). Even those closest to buying property or who have recently bought property were inclined to agree, with 53% of prospective FHBs and 49% of current FHBs believing homeownership was unrealistic for most Australians.
Full report below.
