Paying down the mortgage took precedence over spending throughout 2012, yet there are signs of life in the property market, new research from RP Data has revealed.
According to research analyst Cameron Kusher, most institutions are keen to understand whether or not the conservatism towards spending in 2012 will persist into 2013.
“Consumer sentiment is likely to heavily influence the performance of the housing market and the broader economy throughout 2013,” Mr Kusher said.
As reported in the RP Data-Rismark Home Value Index results for December, capital city home values fell by 0.4 per cent in 2012.
This result has highlighted an overall weakness in demand; however, the results for transaction volumes to October 2012 were 21 per cent higher than they were a year earlier, indicating consumers are once again starting to spend on housing.
A recent survey by realestate.com.au also suggested that property remained an attractive proposition for many Australians this year.
Mr Kusher said the recent improvement in sales activity has occurred off a very low base throughout 2011.
Over the second half of the year, home values also started to improve. After reaching a low point in May 2012, capital city home values rose by 1.8 per cent by the end of December.
Elsewhere across the economy, Mr Kusher said the results show that consumer sentiment has typically pointed to higher levels of pessimism than optimism over the past few years.
“Although an improvement in consumer sentiment will be an important element to a sustainable recovery in the housing market, respondents to the monthly consumer sentiment survey already feel that now is a good time to buy a home,” he said.
The 'Time to Buy a Dwelling' index, produced as a subset of the Consumer Sentiment Index, recorded 140.0 points in January, which indicates most respondents feel it is a good time to buy a home, with standard variable mortgage rates having fallen by 135 basis points since October 2011 and home values falling over 2011 and 2012 respectively.
“Overall, consumer sentiment will feature heavily in the performance of the national housing market throughout 2013. If recent optimism can be maintained, then we may see home values and sales activity pick up throughout the year. However, if sentiment weakens, it is likely to delay a sustainable improvement in the housing market,” Mr Kusher said.