According to ME Bank’s latest report, first-home buyers in Australia are still optimistic about breaking into the housing markets despite rising prices.
According to the study, more than half (50%) of first-home buyers plan on buying property in the next 12 month. Andrew Bartolo (general manager at ME) said that this increase in homebuyer intent could be explained by the low interest rate environment and fear-of-missing out trend.
“Rising property prices have the potential to drive first-homebuyers out of the market. But, they also signal a stronger market that offers a worthwhile long term investment,” he stated.
The sentiment towards the property market has also been improving, with a third consecutive month’s growth.
Positive outlook on the market may be due to the expected increase in home values over the next few month. In fact, more than half of Australians anticipate that prices will rise this year.
Bartolo stated, “Considering a mixture of market factors such as the buzz of home value growth, solid spring selling seasons, plus rate cuts, and signs from RBA that rates are going lower for longer, it’s not surprising overall property sentiment has improved.”
While this optimism is helping to ease financial worries, affordability for housing continues to be a major problem for many Australians. Homebuyers continue to face a lack of choices.
Bartolo stated that although housing supply has increased slightly, prices are rising and the demand is outpacing supply, almost two-thirds of Aussies still don’t believe there’s enough choice. “With so many first home buyers planning to purchase in 2020, and most stating that the lack of choice on the market is a barrier,” Bartolo said.
The Commonwealth Bank recently conducted a similar study on Australians’ intentions to buy a home. The Commonwealth Bank Household Spending Intentions series (HSI) found that home-buying spending intentions are running at a record rateThis is a sign of early signs of positive wealth effects.
“The home-buying intention series rose again, and it is now at a new record high. Michael Blythe chief economist of CBA said there are signs of a wealth effect’ in the housing market that supports spending on motor cars, although at a low level.
According to the study the increasing interest in purchasing a home could increase the price rise during the second quarter of 2019 and the first six months this year.
The latest consumer price index, which was released last week, will encourage more buyers and lenders to enter the market.
The Australian Bureau of Statistics has released figures that show CPI increased 0.7% in December quarter. This is lower than the target of RBA. Adrian Kelly, president of The Real Estate Institute of Australia, stated that this means interest rates will likely remain low for a long time.
He stated that homebuyers can rest assured knowing that the RBA’s latest inflation data will suggest that they won’t be raising official interest rates until after the RBA meeting next Wednesday.