The Consumer Sentiment Index rose 6.2 per cent to 89.8 in October, marking a two-and-a half year high, according to the Westpac-Melbourne Institute Consumer Sentiment Bulletin.
Buyer sentiment increased, with the report noting a 2.6 per cent rise year-on-year in consumer sentiment related to “time to buy a dwelling”.
The rise comes as consumers grow more confident that the Reserve Bank of Australia is unlikely to raise interest rates in the next year, which could lead to an easing of cost-of-living pressures – the main cause of negative sentiment.
The Interest Rate Expectations Index recorded a 35.4 per cent drop in the last year and is down 14.1 per cent since September, with improved expectations for interest rates bringing a slight increase in house-related sentiments.
The expected stabilisation of interest rates is a positive shift for the buyer market across Australia, with consumers reporting a 4.5 per cent drop in price expectations year-on-year.
Despite this slight improvement, price expectations remain high with 66 per cent of consumers anticipating prices to rise over the next 12 months.
While consumer sentiment remains generally pessimistic, overall sentiment shows Australians anticipate their finances to mostly remain steady over the coming 12 months.
This outlook is closely split between consumers expecting their finances to improve and those anticipating a decline over the next year as the Family Finances subindex sits near neutral level (100) at 99.7.
There is a larger improvement among consumers with a mortgage, with the subindex lifting 10 per cent, compared to a more modest 3.8 per cent gain among a broader group of consumers since May.
A factor contributing to pessimistic buyer sentiment is the disconnect between wary buyer sentiment contrasted with the seller’s optimistic price expectations.
While the sentiment remains largely uncertain, there has been a 2.5 per cent increase since September in the Time to Buy a Dwelling Index, the highest since the beginning of the year.
The shift in buyer sentiment comes as consumers feel increasing confidence in the stability of interest rates, family finances and the job market, leading to a more optimistic outlook on the property market and the economy more broadly.
Queensland and South Australia saw significant gains in October with an increase of 32 per cent and 19 per cent, respectively. This comes as the state governments introduced additional assistance for first home buyers across the regions.
Buyer sentiment across Western Australia and Victoria experienced a drop of 10.5 per cent and 8.9 per cent, respectively, with the main pain points being rampant price growth in Western Australia, and over supply and recent tax changes in Victoria.
The House Price Expectations Index saw a slight increase of 1.8 per cent, bringing it to 153.2, with the gains stemming mostly from Victoria (9.1 per cent) and NSW (5.4 per cent).
The index is still tracking lower than the recent high of 163.8 reported in June, with an easing of price expectations in Queensland (-5.8 per cent) and Western Australia (-7.2 per cent).
The recent rise in the Consumer Sentiment Index, particularly with the focus on house-related sentiments, signals a potential turning point in consumer confidence in the buyer market.
While Australians are still facing high price expectations, the upturn in the Time to Buy a Dwelling Index indicates a renewed optimism among consumers to explore purchasing options.
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