Home buying sentiment at 15-month high: Westpac

The Westpac Melbourne Institute Consumer Index report for March 2024 has revealed the “time to buy a dwelling” index rose by 4.9 per cent to 77.8 index points.

This represented a “15-month high”, however, sentiment levels are still in a “relatively weak, pessimistic range”.

According to the report, sentiment was notably stronger in Victoria at 84.3 index points where Melbourne’s dwelling prices have seen “slight spillage over the last four months”.

However, the NSW index told a different story, only reaching 73.3 points as continued gains in Sydney’s dwelling prices and the associated deterioration in affordability are weighing more heavily on consumers.

Matthew Hassan, senior economist at Westpac said: “Housing-related sentiment improved slightly overall with another lift in assessments of time to buy and price expectations holding at optimistic levels.”

Expectations for house price increases were largely unchanged in March, the major bank found, falling slightly by 0.2 per cent to 161.1 points, with almost 70 per cent of consumers expecting house prices to continue increasing throughout 2024.

Furthermore, recent commentary from the Reserve Bank of Australia (RBA) has appeared to be alleviating consumer expectations for interest rate hikes.

The report found that fears of rate hikes are beginning to ease, but few are expecting rate cuts to occur in the near term.

The Westpac Melbourne Institute Mortgage Rate Expectations Index, which tracks consumer expectations for variable mortgage rates over the next 12 months, fell 0.5 per cent to 120.9.

Hassan said: “The mix of responses shows 40 per cent of consumers are still bracing for rate increases, 22 per cent expect no change, 22 per cent expect declines and 15 per cent simply ‘don’t know’.”

He added that the major bank expects the RBA to leave the official cash rate unchanged once again in its next board meeting on May 6–7 so long as inflation continues to track towards the 2–3 per cent target band over “a reasonable time frame”.

“The extended period of weak consumer sentiment reads – added to this latest update – and the associated flattening in demand are key to ensuring the cooling in inflation occurs in a timely way,” Hassan concluded.

“For consumers, the inflation and cost-of-living crisis may be becoming less acute but it will likely remain the dominant concern for some time yet.”

[RELATED: Buyers determined despite ‘extremely stretched’ affordability: Westpac]