Queensland and WA lead improvement in house price sentiment in January: Westpac
House price expectations improved markedly in January led by improvements in the resource-rich states of Western Australia and Queensland, according to the Westpac-Melbourne Institute Consumer House Price Expectations Index.
The index posted a strong rise in January, increasing 16.1 points from 9 in October to a current level 25.1 – the highest reading since April last year and the first gain since January 2010.
Despite this improvement in sentiment, less than half (47.6%) of consumers expect prices to be higher in 12 months, with 30% expecting no change and the remainder (22.5%) expecting further price declines.
Source: Westpac-Melbourne Institute
On a state-by-state basis, Queensland recorded the biggest improvement in sentiment, with its index rising from -9.8 in October to 27 points in January. Nearly half of respondents expect Queensland house prices to increase in 2012. About 30% of respondents expect house prices to stay the same in Queensland.
The Western Australian index improved strongly from 10.1 points in October to 32.7 points in January.
Western Australians are the most optimistic about house prices rising and the only state where more than 50% of those surveyed expect prices to rise over 2012.
Commenting on the January index result, Westpac senior economist Matthew Hassan says state trends were “striking”.
“All states recorded a rise in house price expectations, but by far the biggest gains were in the resource states.
“Expectations have swung 180 degrees in Queensland from price pessimists dominating in October to optimists now outnumbering pessimists by two to one in January.
“Expectations also jumped sharply in WA, which was the only state to record an outright majority expecting house price gains in the year ahead.
Source: Westpac-Melbourne Institute
“Victorian consumers were much more subdued on the house price outlook, with one in four still expecting price declines in the year ahead,” Hassan says.
Hassan says the RBA's interest rate cuts in Nov and December appear to have “driven a significant shift in consumer house price expectations”.
“To date, the trajectory looks similar to that in 2008-09. However, there are some notable differences – the starting point for price expectations is firmer, the interest rate stimulus is less aggressive (mortgage rates fell more sharply and were much lower in 2008-09) and fiscal measures (first-home buyer incentives in particular) are providing less support.
“The improvement is much more lopsided as well with younger age-groups and those in resource states leading the way. This suggests we may also see an uneven improvement in housing markets in 2012.”
First-home buyers are the most optimistic about house prices among buyer types with, investors the least optimistic.
