Buyer confidence returns to pre-GFC levels

Buyer confidence returns to pre-GFC levels

Posted on Wednesday, March 21 2012 at 2:45 PM

A decrease in mortgage stress and an increasing comfort with debt has driven homebuyer confidence up by two per cent this month, returning it back to the higher levels of March 2011, according to the Genworth Homebuyer Confidence Index (HCI).

The HCI, a biannual measure of borrower and would-be borrower sentiment, reports as of March 2012 only one in five homeowners (22 per cent) has experienced mortgage stress in the past 12 months, compared with one in four (25 per cent) in September 2011.

Genworth president and chief executive officer Ellie Comerford said the Reserve Bank’s downward movement of the cash rate has made a difference to confidence despite lenders not passing on the full 50 basis points of cuts.

Comerford said mortgage stress caused by interest rates had eased to 32 per cent this month, down from 50 per cent in September last year.

With house prices easing in recent times, first homebuyers are feeling more at ease when shopping around, with confidence levels up by 1.5 per cent to 99, similar to levels pre-global financial crisis, said Genworth.

The HCI reports only seven per cent of respondents said the location they wished to target was out of their price range, compared with 21 per cent in September last year.

“While cost of living pressures and an increase in unemployment are likely to strain households, currently these problems are being offset by positive factors such as wage growth, low inflation and interest rate cuts. The Australian dream of home ownership is not fading as increasing affordability improves borrower sentiment,” said Comerford.

The HCI also reported the proportion of first homebuyers unable to save for a deposit dropped from 45 per cent to 30 per cent between September 2011 and March 2012.

Turns out the first homebuyers are more optimistic than the average homebuyer, with 84 per cent of those surveyed not expecting difficulty to meet repayments, compared with 78 per cent of average homebuyers.

“The proportion of first homebuyers who said they would be unable to afford repayments fell to 19 per cent down from 38 per cent in September 2011,” said Comerford.

Looking closer at the states, reflective of job confidence, buyer confidence in Western Australia rebounded by 11.2 per cent from a low 90.5 in September 2011 to 100.6 this month.

New South Wales also demonstrated an increase, sliding up by 1.3 per cent from 95.5 to 96.7.

“We have seen a recent stabilisation of property prices in Western Australia which is likely to have boosted confidence. Flatter property prices combined with stable unemployment levels will have driven the spike,” Comerford said.

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