Greater confidence that now is the time to buy

Greater confidence that now is the time to buy

Posted on Thursday, September 27 2012 at 9:02 AM

Improved affordability in housing is returning confidence to buyers, with nearly half of Australians surveyed believing now is a good time to snap up a property, the highest level since before the global financial crisis, according to September’s Genworth Homebuyer Confidence Index (HCI).

The Reserve Bank of Australia’s cash rate drop to
3.5 per cent has only helped improve affordability and buyer confidence, a rate
that’s now 50 basis points below the 15-year average, says Genworth.

According to Genworth chief
executive officer Ellie Comerford, the HCI reveals that homebuyers are far more
positive than the mass media discussions centred on the grey economy.

“Australia has some
compelling economic indicators and a low cash rate that is making many
potential homebuyers believe that now is a good time to be considering home
ownership. However concerns remain around the global economy and the future
impact this might exert on Australia.”

The September HCI also indicates
that mortgage stress fell for the second consecutive survey, from 22 per cent
in March this year to 18 per cent in September, says Comerford.

She adds the proportion of
borrowers expecting difficulty meeting repayments in the coming year fell from
22 per cent to 19 per cent over the same period.

Comerford says this drop in
mortgage stress has most likely been driven by falling interest rates easing
the pressure on households, combined with improved housing affordability.

Cost of living stress
appears to have softened a little due to the lowered cost of mortgages,
allowing Australians to save more and improve sentiment and perception of
greater financial security.

Tasmania was the only state
that didn’t demonstrate a surge in sentiment, according to the HCI.

Victoria saw the greatest
spike in sentiment, up 7.7 per cent from a low of 92.3 in March 2012, leading
New South Wales and Queensland. The HCI translates this as Victorian borrowers being
among the least likely to feel mortgage stress, and the most likely to believe
that now is a good time to buy a home.

The Genworth HCI reports
that South Australia saw a 3.3 per cent increase in confidence, the second
highest among the states, to 99.4. This is translated to mean that South
Australians are among the least likely to have experienced mortgage stress in
the past year, at 17 per cent (down from 23 per cent in March).

Over to Western Australia,
where the smallest increase in confidence was noticed, yet still giving it the
lead, with WA the least troubled state in meeting mortgage repayments.

The highest debt levels and
the highest expectation of difficulty meeting repayments was in Queensland,
with one-third of survey respondents spending more than 50 per cent of their
income on servicing debt, reports the Genworth HCI.

Despite Queensland’s higher
mortgage stress levels, it was also the state where the highest proportion of
survey respondents (54 per cent) believe that now is a good time to buy a

Matching Queensland’s
sentiment figure, 54 per cent of first homebuyers across the nation claim that
it’s currently a good time to re-enter the property market, a figure that has
more than doubled over the past two years.

However the mortgage
servicing ability concern for first homebuyers in the coming 12 months (a rise
of two per cent) told a slightly different story compared to the mortgage
stress experienced in the past 12 months when figures fell from 16 per cent in
March 2012 to 13 per cent in September 2012.

“Despite a slight fall in
first homebuyer confidence, this segment of the market remains more optimistic
that now is a good time to buy a home,” says Comerford.

“What is more heartening is
that first homebuyers are increasingly confident they can save the deposit
necessary to buy their first home.”

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