Home buyer confidence at 18-month high but first-home buyers retreat: CBA/MFAA

Australian households are at their highest levels of financial confidence since May 2011, with more than three-quarters (75.8%) expecting that house prices will grow or remain stable to the end of the year, according to the latest Commonwealth Bank/Mortgage & Finance Association of Australia Home Finance Index.

This is up from 67.3% in March and 53.6% in the third quarter of 2011.

The number of respondents who believe that house prices will fall in the next quarter has dropped to just one-quarter (24.2%), from 32.7% in March and 46.4% in the third quarter of 2011.

Property market sentiment is highest in Western Australia, with 42.7% of WA respondents expecting prices to be higher over the next 12 months, followed by NSW, with 31.1% expecting higher prices over this time frame, although some 22.4% of NSW respondents expect lower prices.

Victoria is polarised, with a fairly similar proportion expecting an increase (26.8%) and a decrease (29.0%).

The weakest expectations are in South Australia, where 18.9% of South Australian respondents expect property prices to  rise in the next 12 months and nearly a third (32.9%) expecting them to fall.

The overall sentiment index increased to 90.6, up from 84.0 in March 2012 and well above a September 2011 low of 73.5 suggesting continued growth in property prices in the coming quarter.

According to the survey, the uptick in home buyers' optimism is being driven by flat property prices and continuing falls in interest rates, creating a "buyer's market".

The results are based on a survey of 1,423 people carried out by CoreData between August 9 and August 31.

“All of the signs are for a recovery of the property market, with Western Australians the most optimistic of the states, followed by people in NSW. The property market is all about confidence and the survey confirms that good times are ahead, especially as interest rates continue to fall,” says MFAA chief executive officer Phil Naylor.

The survey also found that the proportion of first-time buyer respondents who believe it is a good time to buy a new home fell from 51.7% in March to 42.4% in September, with anxiety regarding servicing a large debt if a property were purchased the primary concern of first-time buyer respondents rising to 71%, up from 69.2% in the last quarter.

Slightly more first-time buyers are placing buying a home on hold due to the payments and level of borrowing required (56.2% vs. 54%), and delaying their first-home purchase due to economic uncertainty (43.4% vs. 40.0%).

Of those first-time buyers who say it is a good time to buy, they are encouraged because prices are low and rates are down.

WA first-time buyers are the most convinced it is a good time to buy (54.3%), followed by those in Queensland (50.0%). This is a reversal on March, when WA respondents were least convinced it was a good time to buy, suggesting that they may perceive that affordability has improved.

Only around 40% of first-time buyers in NSW, Victoria and South Australia believe it is a good time to buy their first home.