There's a new sense of optimism in the housing market, with more Australians predicting that house prices will rise over the next 12 months.

That is the key takeaway from ME’s latest Quarterly Property Sentiment Report, which surveyed 1,000 Australian adults in the residential property market to understand how they felt about the market.

Encouragingly, only 17% now expect prices to fall over the next 12 months (down from 28% in April), 38% expect prices to rise (up from 32% in April), and 30% expect them to stay the same (29% in April) – adding further weight to suggestions that the worst price falls are behind us.

Likely contributors to the jump in positivity are a number of changes in the external environment, such as rising auction clearance rates, the Coalition’s unexpected election win, two Reserve Bank rate cuts, and the easing of serviceability requirements by the Australian Prudential Regulation Authority.

Added to the budding sense of optimism around future price growth is an easing of financial concerns among property owners, including concerns about tighter credit policies (down 10 points), negative equity (down 7 points), being forced to switch to principal and interest repayments (down 7 points), and property values falling (down 5 points), which have all eased.

However, when you delve deeper, investors are far more concerned about the issues mentioned above than owner-occupiers.

Investors’ sense of wealth also took a hit, with 37% saying recent price movements had had a negative impact on their sense of wealth – up from 29% in April.

It’s likely these factors may have dampened investors’ overall sentiment towards the property market.

When asked ‘How do you feel about the property market?’, investors were the only group with fewer respondents who said they felt positive, dropping to 40% from 44% in April.

Given the election result, we expected investor sentiment to bounce a little bit more; however, enduring worries and a decreasing sense of wealth have probably almost outweighed some of the election-based changes at a sentiment level for investors.

The key question, then, is how has this translated to market activity? What the findings suggest is that more people plan to sit on the fence, taking a ‘wait and see’ approach to the market. Overall, 63% had no plans to buy or sell property over the next 12 months – up from 58% in April.

With an extensive amount of change fresh in everyone’s mind, understandably it may take some time for sentiment and price expectation shifts to translate into actions.

Looking ahead to the rest of the year, property sentiment will be a factor to watch as Australians in the market digest all the recent economic and political changes. While we’re starting to see some green shoots in sentiment, it’s too soon to call a ‘market turn’ yet.

Craig Ralston is group executive, customer banking, at industry super-fund-owned bank ME