Australians seemed to have more appetite for housing over the past month, with buying intentions rising slightly according to two separate consumer indices.
Both CommBank Household Spending Intentions (HSI) index and Westpac Melbourne Institute Index of Consumer Sentiment showed improvement in buying intentions among Australians in August.
Homebuying drives uptick in CommBank’s sentiment index
CommBank’s HSI index was up 0.8% over the month, thanks to the 10% gain in the homebuying segment.
The growth in homebuying intentions index came after two consecutive months of decline, possible due to the rate hikes.
According to CommBank, the number of home loan applications rose on the month, including refinancing.
Google searches related to the housing market were also higher over the past month.
Interestingly, the over-the-month uptick in homebuying intentions came alongside the 1.6% decline in dwelling prices based on CoreLogic Data.
On an annual basis, however, the homebuying intentions index was down 23.6%, reflecting the impact of the recent rate hikes by the Reserve Bank of Australia.
Price expectations rising
Westpac Melbourne Institute Index of Consumer Sentiment painted a similar story — the time to buy a dwelling index increased 2.9% to 80.5 during the month.
Despite the improvement, however, the index is still down from its peak in November 2020 and the long run average reading of 117.5.
Surprisingly, there was a modest firming in house price expectations over the month, with the index nudging back into slight positive territory. This follows consecutive falls that had taken the index 38% lower over the previous six months.
Price expectations rose the highest across states that have been most impacted by the current cooling in the market — the indices were up 6.2% in New South Wales and 33% in Victoria.
On the other hand, price expectations were down in Queensland and Western Australia.
Overall, the Westpac Melbourne Institute Index of Consumer Sentiment increased for the first time during the month since November 2021, which is unexpected given the upwards trajectory of cash rate.
Does this mean that Australians are getting used to rising rates? Westpac chief economist Bill Evans said sentiment will depend on the future movement of the cash rate.
“The RBA’s September interest rate rise also looks to have been less unnerving for consumers — indeed, sentiment was higher amongst those surveyed after the Reserve Bank’s decision,” he said.
Westpac forecast points to the cash rate hitting 3.35% by February after consecutive 25bps increases leading up to the second month of 2023.
“It will be interesting to see how consumer sentiment responds if the pace of tightening slows,” Mr Evans said.
“We expect sentiment to hold in the current range as consumers realise that the tightening cycle has further to run, although a smaller rate increase in October will be encouraging for some.”
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