Now might be the best time to buy,
Prospective home buyers have become less pessimistic about the current housing market. This change marks the lowest level since early 2023.
According to the Westpac-Melbourne Institute Consumer Sentiment survey, consumers anticipate interest rates may start to decline soon. They also expect house prices to increase over the next year.
Brokers report that some buyers are acting now. They aim to purchase before potential rate cuts increase competition in the market next year.
The “time to buy a dwelling” measure rose to 78 points. This is the highest reading since the beginning of last year, yet it remains in negative territory.
Westpac found this score is significantly below the benchmark of 100 points. Senior economist Matthew Hassan noted it is also below the long-term average of approximately 120 points.
He stated, “It has improved slightly, but the sentiment remains fairly pessimistic.” People have relaxed somewhat regarding fears of rising interest rates.
Furthermore, consumers are starting to accept that rates may decrease rather than increase in the future. However, this improvement stems partly from local factors influencing different regions.
For instance, Queensland and South Australia have seen jumps due to state government assistance for first home buyers. In contrast, Victoria experienced a decline amid increased taxes for property investors.
The survey revealed mortgage rate expectations have dropped by one-third since July. Additionally, two-thirds of consumers now expect house prices to rise in the upcoming year.
Hassan explained, “Interest rates certainly affect the market, but prices and incomes also play a crucial role.” Although the interest rate situation is improving, the overall affordability change will be fairly marginal.
Receive the latest property news and advice directly in your inbox
He anticipates an initial cash rate cut in February. Following that, he expects a tentative easing cycle with subsequent cuts.
He emphasized that determining whether it’s a good time to buy depends significantly on individual circumstances. Those capable of taking on debt in a high-interest environment have a clear advantage.
Conversely, others may feel priced out due to elevated mortgage rates. “Currently, there’s no expectation of better prices by delaying a purchase,” he explained.
However, they are not observing lower interest rates that could help bridge the affordability gap. AMP chief economist Dr. Shane Oliver commented on the survey findings.
Although many consumers believe it is not a good time to buy, the situation might be favorable. This is particularly true when interest rates are high and buyer demand is low.
In areas where prices are softening, such as Melbourne and parts of Sydney, it may be an opportunity. “We’re also noticing an increase in listings,” he added.
As a result, it’s becoming more of a buyer’s market in those locations. He remarked, “It’s not a bad time to start looking.”
However, the scenario differs in Brisbane and Perth. There, property prices have been surging, creating a distinct market situation.
He predicts an interest rate cut in February of next year. Yet, he noted that it could happen as early as December.
This is contingent on the underlying inflation rate continuing to decline. An easing cycle would significantly boost the property market, he stated.
Historically, a couple of rate cuts have usually been necessary before the market begins to take off.
“Once buyers begin to see interest rate cuts, their enthusiasm will likely increase regarding expectations for further cuts ahead.” He stated that this trend could ultimately elevate the property market.
However, this uplift may not occur immediately after the first cut. “By April or May, you would expect stronger momentum,” he suggested.
This momentum could lead to an increase in average prices and signify the cycle beginning to rebound. Furthermore, if rate cuts become evident, there may be limited additional increases in distressed sales.
This reduction in distressed sales could establish a pricing floor, he explained. “If rate cuts are on the horizon, it makes sense to hold on,” he added.
Mortgage broker Chris Foster Ramsay has observed buyers trying to act before the Reserve Bank makes any moves. “The savvy buyers aim to purchase before the rate cut due to potential market shifts,” he said.
He noted that buyers often ask, “If rates drop, does borrowing capacity increase, leading to more competition and rising property prices?” This is the common sentiment he has encountered.
When buyers inquire whether they should buy now or wait, he emphasizes potential risks. If they postpone for lower rates, they may end up paying more for a home.
He remarked that single-income buyers find it “exceptionally challenging” to compete for suitable homes. As a result, they often compromise on size, location, or seek assistance from family.
Meanwhile, double-income buyers have improved borrowing capacity. However, they still frequently require cash contributions or federal government support for their deposits.
