Housing market confidence declines: Westpac consumer index

Housing market confidence declines: Westpac consumer index
Jonathan ChancellorDecember 7, 2020

Confidence around the housing market has deteriorated, according to the Westpac Melbourne Institute Index of Consumer Sentiment.

The index tracking assessment of ‘time to buy a dwelling’ fell by 10% to its second lowest level since November 2010.

"That response is probably being driven by recent price increases in Sydney and Melbourne with respondents assessing that prices have moved too quickly," Westpac chief economist Bill Evans said.

"Certainly, the responses for NSW (down 21.5%) and Victoria (down 8.3%) point to that sentiment."

Despite the weakening confidence around the purchase decision prospects for house prices lifted further. 

The Westpac Melbourne Institute Index of House Price Expectations increased by 2.8%.

Evans noted the Reserve Bank Board next meets on 5 May, one week before the announcement of the Commonwealth Budget.

"On 4 December last year we forecast that the Bank would cut rates twice in two 25bp tranches beginning in February 2015," Evans said.

"We expected, at the time, that because it was clear that a total of at least 50bps would be needed, the second move would come in March.

"Readers will be aware that the Bank is still to deliver the second tranche.

"Delaying the decision until May is consistent with a cautious approach near the end of a long easing cycle.

"The unexpected 21% fall in the iron ore price with its associated implications for the terms of trade and nominal income growth strengthens the case for more rate relief.

"Today’s drop in Consumer Sentiment, well into the range where pessimists outnumber optimists, also supports the case for a further cut.

"We are extremely confident that the Bank will finally deliver the much anticipated second cut of 25bps on 5 May."

Jonathan Chancellor

Jonathan Chancellor is one of Australia's most respected property journalists, having been at the top of the game since the early 1980s. Jonathan co-founded the property industry website Property Observer and has written for national and international publications.

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