Confidence in residential property improves in July

Consumer sentiment data published by Westpac and the Melbourne Institute this month shows there has been a bounce back in confidence amongst Australians during July.  The Index gained 11.1% in July and has remained above 100 points (an index value of 100 is where optimists and pessimist are equally weighted) since June last year.  Since interest rates started rising in October last year the Index had been trending downwards, however the July result brings the confidence measure back well above the five year average.

The latest figures show that Australians remain reasonably optimistic about Australian economic prospects.  A stabilisation in interest rates, strong jobs figures and some improvement in global financial markets are likely to be the main drivers behind the improvement.

A byproduct of the Consumer Sentiment Index is the ‘Time to Buy a Dwelling Index’ which has also seen a sharp improvement during July.  This Index recorded a 15.6% jump in July suggesting that consumers are viewing a residential property purchase much more positively than they were last month.

Time to buy a dwelling index

Even though there has been a surge in the Time to Buy a Dwelling Index, Australian’s remain much less optimistic about the real estate market than they were at the same time last year.  The index is down 24% between July 2009 and July 2010 highlighting the slowdown in market conditions that has been seen over the second quarter of 2010 (the RP Data-Rismark Hedonic Home Value Index showed home value growth has virtually stalled in April and May – see release here).

Looking forward, the consumer mind set with regards to residential property is likely to be largely influenced by the perceived direction of interest rates.  The consensus seems to be that interest rates are likely to remain flat for the foreseeable future; however the big test will of course be CPI results which are released on July 28th.  A stable rate environment is likely to see more owner occupiers viewing the residential market in a positive light.

Despite this, it is unlikely that we will see consumers viewing the residential property market with the same exuberance as last year, especially considering that value growth is now slowing and the historically low interest rates seen through most of 2009 are well and truly behind us.

About Tim Lawless

Tim heads up the RP Data research and analytics team, analysing real estate markets, demographics and economic trends across Australia

Connect with CoreLogic

Enter your email address to subscribe to our e-newsletter, and have new posts delivered via email. You can also connect with CoreLogic on social media.

No comments yet.

Leave a Reply

Notify me of followup comments via e-mail. You can also subscribe without commenting.