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The Westpac-Melbourne Institute Index of House Price Expectations has continued to rise, with the index jumping by 2.7 per cent in April, to be 8 per cent above its pre-pandemic level.
The figures also revealed that nationally, the index is now at its highest level since December 2013, and only 1.6 per cent below the previous peak.
Victoria recorded the largest increase in the house price rise expectations index (up 10.2 per cent), followed by South Australia (up 8.9 per cent), while price expectations were steady in the other states in April, according to the data.
Simultaneously, the “time to buy a dwelling” index fell by 7.9 per cent and is now 18.8 per cent below its recent peak in November.
Explaining the dip in the appetite to buy property, Westpac chief economist Bill Evans, said: “Buyers appear to be discouraged by the recent surge in prices and implications for affordability.”
Mr Evans also observed that the survey has sent a clear indication around the housing market, and pointed to signs that rising prices are driving a widening divergence between owner-occupiers and investors.
“Owner-occupiers are likely to be more sensitive to affordability rather than prospects for capital gains, which usually drive investors,” he said in his analysis.
Consumer sentiment bounces
Overall consumer sentiment increased by 6.2 per cent in April, according to the index of consumer sentiment, which Mr Evans called “an extraordinary result”.
“From my own perspective, I considered that there was a reasonable case for the index to pull back, reflecting developments since the March survey,” he said.
Mr Evans also said that the consumer sentiment index is now at its highest level since August 2010 when Australia was experiencing a rebound after the GFC, as well as the mining boom.
He attributed the surge in consumer sentiment in part to the strong housing market, stating that auction clearance rates have been close to 80 per cent recently, while dwelling values have lifted by 5.8 per cent nationally since the beginning of the year.
He also noted that households have remained resilient despite the survey of 1,200 adults aged 18 and over being conducted amid the slow progress of the coronavirus vaccine rollout in Australia, and in the week following the unwinding of the federal government’s JobKeeper program.
He said: “Initial fears that this and associated job losses would undermine confidence has proven to be unfounded.”
An industry breakdown of consumer sentiment has shown significant gains among those working in construction (17.3 per cent), including tradies (18.5 per cent) and labourers (14.6 per cent). Mr Evans said that this suggests that a surge in housing construction activity is also providing a boost to overall consumer sentiment.
Sentiment has also improved among those employed in the recreational services and hospitality industries by 23 per cent and 14 per cent, respectively.
Mr Evans attributed this to the further easing of COVID-19-related restrictions, which has allowed businesses in these sectors to resume full operations.
“This result is particularly pertinent given that the unwinding of JobKeeper was expected to disproportionately impact recreation and hospitality,” Mr Evans said.
Expect regulatory intervention in 2022
With the Reserve Bank of Australia board due to meet on 4 May for its next cash rate decision (one week before the federal budget is released), Mr Evans said that he expects the RBA to confirm that there are no immediate plans to intervene in the housing market through the macro-prudential-style measures implemented in previous years.
“Westpac expects that approach to change by the middle of 2022 as the authorities respond to further increases in prices and a likely lift in investor activity, in line with the signals emerging from this month’s survey,” Mr Evans said.
[Related: Housing sentiment defies broader mood]
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