Best time to buy a home in three years,
Australian consumers now believe it’s the best time to buy a home in nearly three years.
This comes as the outlook stabilises for interest rates, while inflation begins to ease.
The Westpac-Melbourne Institute time to buy a dwelling index surged 21.7 percent in the three months to November.
However, it remains below the long-term average and still reflects overall pessimism in the housing market.
Yet, this is the highest reading since early 2022, just before interest rates started increasing from ultra-low levels.
Westpac senior economist Matthew Hassan noted that improving sentiment aligns with a rise in broader consumer confidence.
Households have become more confident that no further rate hikes are likely in the near future.
Additionally, modest improvements in budgets, largely driven by tax cuts, have also played a role.
Sentiment about the timing of home purchases had been at rock-bottom levels for a couple of years.
Now, it has slightly lifted, though it remains relatively weak.
In particular, consumers on the eastern seaboard are showing less negativity about future inflation and interest rate expectations.
They now anticipate some easing in the year ahead.
Although there is no widespread expectation of interest rate cuts next year, people are sensing a shift in direction.
Despite more optimism about finances, nearly two-thirds of those surveyed expect property prices to rise over the next year.
Hassan stated it was a dilemma that, on one hand, households believed it was a better time to buy a home.
However, on the other hand, they expected already-high prices to continue rising.
He explained that given the price increases over the past two years, modest interest rate reductions wouldn’t significantly improve affordability.
This suggests that even with some easing, housing remains unaffordable for many prospective buyers.
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“The purchasing power of buyers has not improved significantly,” he stated, highlighting the limited impact of recent changes.
He predicted property markets would recover in the second half of next year, driven by expected rate cuts starting in May.
However, he believed the recovery would still be hindered by ongoing affordability challenges that buyers face.
“It’s better than it was when interest rates were high, but not dramatically so,” he explained.
This means that not everyone will suddenly be able to transact, making the upturn constrained.
Gareth Aird, Commonwealth Bank’s head of Australian economics, noted that moderating property markets in Melbourne and Sydney made it a better time to buy.
He mentioned that property prices in these cities had dropped recently, with more listings and lower auction clearance rates.
“This suggests improved conditions for those looking to purchase compared to previous cycles,” Aird added.
He also pointed out that some auctions were being withdrawn before their scheduled date, signaling a better market for buyers.
Aird agreed that interest rates are unlikely to rise further and will probably start decreasing next year.
CBA predicts this will happen in February but acknowledges the possibility of delays.
“The market has cooled, especially in Sydney and Melbourne, which makes buyers feel more at ease,” he said.
With more property available, the urgency and fear of missing out (FOMO) are no longer significant concerns.
Mortgage broker Chris Foster-Ramsay has observed that clients now have plenty of homes to choose from, but not all are appealing.
He pointed out that several former investment properties for sale require significant work, making them less desirable.
The Melbourne-based Foster Ramsay Finance principal broker noted that the auction market has been inconsistent.
Some buyers attend auctions with no bids, while others see high demand for properties.
However, the variety of available homes gives potential buyers some breathing room.
“Buyers now have more time and flexibility to wait and consider more options than in a high-demand market,” he explained.
Foster-Ramsay also mentioned that borrowing large sums from lenders has become more difficult recently.
Even those who get pre-approval are often hesitant, wondering when interest rates might decrease.
“It’s no longer an urgent need to buy,” he said.
As a result, discussions within families revolve around finding the right property and waiting for it to appear.
