Australians Upbeat On Property

Australians are confident house prices will rise between now and the end of September, driven by the general consensus that interest rates will remain stable for the foreseeable future.

In fact Australians are showing their highest levels of confidence towards house price rises since CoreData began measuring quarter-on-quarter two years ago.

More than one in two Australians, or 57 per cent, believe property prices will rise over the next three months.

Figure 1 below shows the net difference in sentiment between those who believe property prices will rise or fall over the next quarter and shows the improving sentiment over the previous 12 months.

Net Property Sentiment

Source: CoreData

Only 13 per cent of the 1,778 people surveyed between June 4 and June 12 anticipated residential property prices falling over the third quarter of the year – down from 42 per cent of respondents in a December survey.

Residential house prices in many areas (excluding large parts of Queensland and Western Australia) have been stagnant or only grown modestly for some time.

However the poll reveals, among consumers at least, the belief is that the property downturn is well and truly over as optimism about the property market rises.

While analysts say interest rates could still rise in 2007, most respondents in the survey did not feel this would be the case – potentially fuelling further property price increases.

The chart below shows a significant move from an expectation of rate increases to a more neutral expectation.

Interest Rate Expectations Q3 07

Source: CoreData

The survey showed evidence of a two tier economy with 45.1% of borrowers saying the last three rate rises had had no significant impact on their ability to meet loan repayments.

Lower income groups however showed increased pain with just over 70% of those earning less than $75,000 per annum per household saying the increases had made repaying their loan more difficult.

The survey also revealed 5 per cent of respondents had sold properties because they could not afford to keep up with higher loan payments

Bank repossessions of properties are growing around Australia, particularly in the lower income mortgage belts of Sydney and Melbourne, as some people fall behind on mortgage repayments given high living costs.