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The major bank’s monthly survey has found some positivity in the attitudes of potential home buyers.
The Westpac-Melbourne Institute Consumer Sentiment Index revealed that the ‘time to buy a dwelling’ index has shown a slight increase of 1.6 per cent to 76.5 bps in May.
According to the index, this lift has reserved “about half” of the decrease of 3.2 per cent in April; however, it remains well below the “neutral” level of 100 and a long way off from the historical average of 121.
This has shown an increase of 0.2 per cent on the same period last year (May 2023).
Despite the increase, buyer sentiment still remains “deeply pessimistic” while price expectations continue to hold at very positive levels.
The Westpac Melbourne Institute Index of House Price Expectations remained unchanged month on month at just over 161 bps, above the long-term average of 126.5.
Furthermore, according to the Mortgage Rate Expectations Index, the recently announced federal budget appears to have eased inflation and rate rise concerns instead of exacerbating them.
The index tracks expectations for variable rate mortgages over the next 12 months. For the May survey, the index increased 8.3 per cent to 133 bps from 122.8 bps in April.
Westpac Group senior economist Matthew Hassan said: “However, most of that move occurred prior to the budget, with those surveyed before showing a combined index read of 136.5, while those surveyed after had a combined index read of 128.5.
“This strongly implies that the source of renewed rate rise fears was the higher-than-expected March quarter inflation outcome and more ‘vigilant’ inflation-fighting rhetoric from the RBA Governor following the Board meeting in early May.
“In terms of the component detail in May, consumers were slightly more positive about the outlook for both family finances and the economy, but this was completely offset by a deterioration in current assessments of family finances and buyer sentiment.”
Hassan further said that the main takeaways from the May survey are that there has “been no let-up” in weak consumer environment.
“… [A]nd that, given the weak starting point and very cautious mindset, consumers are more likely to use funds from fiscal measures to repair their finances than go on a spending spree that could undermine the Reserve Bank of Australia’s (RBA) efforts to bring inflation back to target,” he said.
Hassan said that Westpac once again expects the RBA to leave the cash rate unchanged in the upcoming 17–18 June meeting.
