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House price rise dampens FHB sentiment: ME Bank

First home buyers recorded the lowest level of positive sentiment about the housing market amid rising prices and supply concerns, while sentiment has dipped across all cohorts, a survey showed.

ME Bank’s Quarterly Property Sentiment Report April 2021 has revealed that the record-high sentiment during the first quarter of 2021 has deflated, with the overall sentiment of buyers and sellers in the residential property market declining by seven percentage points to 42 per cent in the past three months.

Among buyer groups, first home buyers (FHB) recorded the lowest level of positive sentiment this quarter, down three percentage points from the previous quarter to 24 per cent, and five percentage points lower than the same time last year.

On the other hand, investors recorded the highest sentiment at 52 per cent, but this was still down from 58 per cent in the previous quarter.

Sentiment dipped by nine percentage points among owner-occupiers, from 58 per cent in the previous quarter to 49 per cent in the second quarter of 2021, the ME Bank survey of 1,000 adults in the property market (investors, owner-occupiers and FHBs) found.


The bank partly attributed the dampened housing sentiment among buyers and sellers to supply concerns and a fall in perceived availability of residential property.

Indeed, the figures showed that 60 per cent of survey respondents believe that there “isn’t enough choice in the current residential property market”, a 17-percentage point increase since January.

The survey also found that more regional buyers believe that there is insufficient choice (65 per cent), particularly in NSW (71 per cent), compared with metropolitan buyers (57 per cent).

Concerns about housing affordability were cited as another reason for the declining sentiment, with 91 per cent of all survey respondents and 93 per cent of FHBs saying that “housing affordability is a big issue in Australia”. 

According to ME Bank, affordability concerns are likely being exacerbated by expectations of further house price growth, with around 67 per cent of those in the residential housing market “expecting prices to increase in their area during the next 12 months”, marking a 13-percentage point increase since January this year.


The report also stated that while sentiment has dipped among FHBs, property owners’ sense of wealth (41 per cent) and general finance confidence (42 per cent) increased to the highest levels since the ME Bank survey began in April 2019.

However, 82 per cent of the property buyers surveyed said that they are concerned about “paying too much” for property in the current market.

Over half of the survey respondents (58 per cent) said that those looking to buy property feel a sense of fear of missing out (FOMO) in buying property in the current market.

Three-quarters of those looking to buy (75 per cent) said that record-low interest rates have made buying or investing in property more attractive to them, the report said.

Buying and selling plans in the next year

Despite the decline in sentiment among FHBs, more respondents from this cohort said that they are looking to buy property in the next 12 months (52 per cent), compared with investors (40 per cent) and owner-occupiers (21 per cent).

Investors are the most eager cohort to sell their property and capitalise on the rising house prices, with 23 per cent indicating that they want to sell their property in the next 12 months, compared with 11 per cent of owner-occupiers.

By location, Sydney residents are more likely to buy (38 per cent) and sell (13 per cent) in the next 12 months, compared with Victorians (32 per cent and 10 per cent, respectively).

Commenting on the ME Bank survey findings, ME head of home loans and personal banking, Claudio Mazzarella said: “When property prices and interest rates lowered last year during the pandemic, a unique buying opportunity opened up for confident FHBs with cash savings and secure employment, while many investors became nervous.

“Now prices have rebounded strongly and affordability is going down, FHBs aren’t feeling as positive.”  

Mr Mazzarella also said that supply is “dwindling” and adding pressure to prices as city dwellers move to regional, or “sea or tree change areas”.

In addition, he noted that rising prices are having the opposite effect on existing owners, compared with FHBs.

“Rising prices are making property owners feel wealthier, when many buyers are stretching their budgets to afford the limited but growing availability of stock on the market at the moment,” he said.

Mr Mazzarella concluded: “Although overall sentiment is lower among FHBs, our findings show they are still the eager to buy property over the next year.

“There’s also a sense of ‘fear of missing out’ in the current market, which can be a key driver for this behaviour.”

[Related: Lenders welcome new Family Home Guarantee]

House price rise dampens FHB sentiment: ME Bank
House price rise dampens FHB sentiment: ME Bank

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Malavika Santhebennur

Malavika Santhebennur is the features editor on the mortgages titles at Momentum Media.

Before joining the team in 2019, Malavika held roles with Money Management and Benchmark Media. She has been writing about financial services for the past six years.

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