Despite rising house prices, Australian first-home buyers remain in high spirits about breaking into the housing market, according to the latest report from ME Bank.
The study found that more than half of first-home buyers are planning to buy property in the next 12 months. This improved homebuyer intentions could be attributed to the low interest-rate environment and the fear-of-missing-out trend, said Andrew Bartolo, general manager at ME.
"Rising property prices carry the risk of squeezing first-home buyers out of the market. However, they also signal a healthier market that presents a worthwhile long-term investment," he said.
Along with the stronger home-buying intentions, sentiment towards the property market also improved, clocking a third consecutive month of growth.
The positive outlook for the market could be attributed to the growth in home values expected over the next few months. In fact, over half of Australians predict prices to rise this year.
"Considering a combination of market factors including the buzz of home-value growth, a solid spring selling season, plus rate cuts and signs from the RBA that rates will stay lower for longer, it's no surprise overall property sentiment has improved," Bartolo said.
However, while this growing optimism eases financial worries, housing affordability remains an issue for many Australians. The lack of choice continues to be a big factor amongst homebuyers.
"Housing supply has picked up slightly, but with prices rising and demand outweighing supply, there's no wonder that almost one in two Aussies don't think there's enough choice available," Bartolo said. "With so many first-home buyers planning to buy in 2020, yet most stating choice in the market is a barrier, addressing this issue should be a focus in the year ahead."
A recent study by the Commonwealth Bank revealed similar findings regarding Australians' home-buying intentions. The Commonwealth Bank Household Spending Intentions (HSI) series found that home-buying spending intentions are running at a record rate, indicating early signs of positive wealth effect.
"The home-buying intentions series lifted again and is now at a record high. There are some early signs of a 'wealth effect' from the housing market supporting spending on motor vehicles, albeit from a very low level, as well as travel and entertainment," said CBA chief economist Michael Blythe.
The growing interest to buy a home could potentially extend the pickup in dwelling prices during the second half of 2019 to the first six months of this year, according to the study.
Aside from the rate cuts and the loosening of lending restrictions, the latest showing of consumer price index would also likely to encourage more buyers to participate in the market.
Figures from the Australian Bureau of Statistics show that CPI rose 0.7% in the December quarter, which is below the target of the RBA. This means that interest rates are likely to stay low for quite a while, said Adrian Kelly, president of the Real Estate Institute of Australia.
"With the RBA meeting next week, homebuyers can be comfortable in the knowledge that the latest inflation data would suggest that the RBA will not be increasing official interest rates for some time yet," he said.