The Westpac-Melbourne Institute Index for June 2021 has revealed that housing-related sentiment has continued to show significant signs of stress, with the “time to buy a dwelling” index declining for the fifth consecutive month.
The index dropped by 7.1 per cent in June, 10.7 per cent in the last year, and is 27 per cent below its November level, according to the major bank.
Westpac chief economist Bill Evans said: “At 96.1, the index is now in outright pessimistic territory for the first time since April last year, and prior to that, late 2017, when housing was entering a difficult period marked by slowing activity and falling prices, particularly in Sydney and Melbourne.”
Victoria recorded the largest slump in buyer sentiment (amid a fourth snap lockdown to contain the spread of the coronavirus pandemic), with the index dropping by 11 per cent in the month, 20 per cent in May, and 24 per cent over the last two months, according to the research.
Property price expectations have shown signs of decline, although consumers have remained very bullish on the house price outlook, Mr Evans said.
The house price expectations index declined by 3.6 per cent in June but remained in strongly positive territory at 157.
Consumers were also asked additional questions about where they see the “wisest place for their savings”.
The research showed that where consumers are a little more open to risk, only 9.5 per cent of consumers nominated real estate as a savings option, up from 9.3 per cent over the last three months.
Mr Evans noted that this has continued the run of “very low reads” seen for real estate over the last year, with the long run average at 25.9 per cent.
“This result might seem at odds with our expectation that investors will assume a dominant role in the current surge in housing activity,” he said.
“While ‘real estate’ is still not viewed favourably, bullish price expectations will still be enough of a drawcard for many investors. The extent to which we see a wider shift in sentiment towards the asset class remains a key uncertainty.”
The proportion of consumers who favour shares has risen from 10.5 per cent to 12.1 per cent over the last three months, while safe options such as bank deposits (29 per cent) and pay down debt (19 per cent) have continued to remain popular among respondents (comparable to the average reads in the years following the global financial crisis), according to the index.
Mr Evans has predicted that financial conditions would gradually tighten, anticipating that the Reserve Bank of Australia board would not extend the yield curve targeting policy from the April 2024 to the November 2024 bond.
“That means it will have passed on the opportunity to reverse the gradual tightening in fixed rates that has occurred since late 2020,” Mr Evans said.
“When assessed in conjunction with the withdrawal of the term funding facility, although banks still have around $64 billion to draw down by the end of the month, the clear signal is that financial conditions are likely to gradually tighten.”
The overall Westpac-Melbourne Institute Index of Consumer Sentiment tumbled by 5.2 per cent in June, which Mr Evans attributed largely to concerns around the two-week lockdown in Melbourne (the survey was conducted during the first week of the lockdown).
The index has returned to January levels, when there were significant lockdowns in parts of Sydney and Queensland, Mr Evans said.
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