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Home buying intentions have further declined in October according to the latest data from the Commonwealth Bank of Australia.
The CommBank Household Spending Intentions (HSI) Index revealed a drop of 3.1 per cent for home buying intentions in the month of October, which has brought the annual change down to the largest decline in this cycle, falling by 27.3 per cent.
The Commonwealth Bank of Australia (CBA) attributes the steep drop to the Reserve Bank of Australia’s (RBA) “aggressive” monetary policy tightening over the last six months and seven consecutive monthly interest rate hikes.
According to the HSI, the lags in monetary policy could result in further weakness in home buying intentions over the following months.
The index also indicates that the rate rises have been reflected in dwelling prices. According to CoreLogic data, dwelling prices fell 1.1 per cent in the month of October (and almost down 1 per cent annually) across all eight capital cities.
Dwelling prices now sit 6.5 per cent lower than the peak in April 2022 and are forecasted to drop a further 15 per cent peak-to-trough in this cycle should the cash rate reach 3.1 per cent.
CBA chief economist Stephen Halmarick said: “As the RBA rate hikes flow through the economy, we would expect to see further declines in a number of HSI categories, although elevated inflation and higher prices could continue to lift nominal spending for a while yet.”
Housing buyer attitudes at ‘historic low’: Westpac
According to Westpac chief economist Bill Evans, the attitudes regarding housing buyers are near “historic lows”.
The Westpac Melbourne Institute Consumer Sentiment Index findings revealed that although the “time to buy a dwelling” index rose 2.4 per cent in November, it still remained in “deeply pessimistic territory at 77.1”.
“This Index has been stuck in the 75–80 range since March this year, 40–45 per cent below the most recent peak in November 2020,” Mr Evans stated.
House price expectations have also entered pessimistic territory, with the index posting a fall of 8 per cent to 91.1, which is a new cyclical low despite it still being above the weakest readings seen during the start of the pandemic and the 2018–19 market correction.
“The RBA’s interest rate decision had a significant negative impact on housing-related sentiment. Responses on house price expectations deteriorated sharply, falling by 13.6 per cent, after the decision was announced,” Mr Evans said.
“The Reserve Bank Board next meets on December 6. We expect the Board to raise the cash rate by a further 0.25 per cent.”
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