Confidence falls despite market stability

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Speculation, rather than any real upheaval in the market is most likely responsible for a recent fall in people’s confidence in the Australian housing market.

Released last week, latest Homebuyer Confidence Index (HCI), released every six months by lenders mortgage insurance provider Genworth, fell to 98.2 in March compared to September 2015’s 99.6.

Despite the fall, the HCI still remains near record levels and Genworth chief commercial officer Bridget Sakr said that reflects relative stability in the market at present.

“The confidence index still remains strong, even though it has fallen slightly. I think when you look at what’s going on in the market from a macro perspective it’s still pretty stable when it comes to things like interest rates and unemployment,” Sakr said.

“I think what probably drives some of this is what we see in the media. There’s been a lot of talk about a housing bubble, the upcoming federal election and changes to negative gearing potentially and lender policies tightening,” she said.

“That all in itself probably creates some form of consumers thinking differently and I think that’s what’s driving it. There’s nothing from a macro perspective that we feel would cause the dip.”

While macro indicators for the market may remain positive, there was a solid drop in whether people believe it is a good time to buy an investment property.

According to the HCI, only 36% of people think now is a good time to buy an investment property, compared with 54% in September 2015.

Sakr said that fall was relatively unsurprising given the fact the investor lending market has been impacted by regulatory measures recently.

“There was nothing too surprising around whether it’s a good time to buy an investment property. There’s been a lot of talk about things like negative gearing; there’s been a bit of lender tightening around investment lending and the out of cycle interest rate rises.

“So there has been some factors in play that would make people consider whether it’s a good time to buy an investment property or not and we did envisage that would have an impact on confidence.”

Cooling price growth in Sydney and Melbourne has also likely pushed some investors to take some time out of the market according to Sakr.

According to the HCI, there was also a fall among people about whether the time is right to buy a home, down to 42% in March from 48% in September.

That fall was even more pronounced among first home buyers, which fell from 67% in September to 50% in March.

Sakr said the fall in confidence among first home buyers is due to worsening accessibility to the market, with rising prices offsetting any positives of low interest rates.

“A third of the first home buyers who replied indicated that property prices are the greatest barrier to home ownership and a quarter suggested that the barrier is saving for a deposit.

“The difficultness in saving for a deposit has increased by 20% since September. I think we need to keep that in mind in the home ownership issues, it’s not the affordability when it comes to interest rates, but the actual accessibility.

“Even though we’ve had those out of cycle rate increases, the interest rates in the first home buyer market are still pretty low, but it’s actually house prices that are making it quite expensive.”

That difficulty has led to an increase in home buyers looking for other avenues to finance property purchases, including credit cards, with the Genworth research showing in the last 12 months, there was a 43% increase in those who relied on other sources, compared to those who purchased in 2009.

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