Negative Consumer Sentiment May Impact Future Housing Market

By Peter Sarmas on 31 May 2013
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Negative consumer sentiment may impact on future housing market











In the past, low interest rates tend to propel a buying frenzy in the property market, but according to RP Data research analyst Cameron Kusher, a predominantly negative buyer sentiment is standing in the way of what would be an otherwise flourishing market.

Despite last weekend’s successful auction market, which saw a 74 per cent clearance rate with a total of 932 properties over both auction and private sales, the latest Westpac Consumer Sentiment Index signifies that overall consumer sentiment fell by -7.0 per cent over the month. The index now sits at 97.6 points – the lowest reading since August 2012.

According to Kusher’s analysis of the RP Property Pulse report released yesterday, there is a strong indication that a number of factors are contributing to a recent decline in buyer sentiment, causing a negative impact on the housing market, despite the recent interest rate cut.  

“It was widely reported that the Federal Budget announcement was largely responsible for the weakness this month,” Kusher says. “Nevertheless, looking at the six month average sentiment figure, it sits at 103.7 points, only slightly more optimistic than pessimistic. This would tend to suggest that consumer confidence remains fragile and is subsequently likely to be reflected in consumer spending habits.”

Kusher predicts that buyers looking to purchase a home in the near future are likely to be holding out for improved confidence and a stable economy so that they are reassured they can service their debt levels.

But the near future for the property market is not necessarily bleak. Kusher claims that “the two months of weakness in data could easily be reversed over the coming months,” but warns that “volatility in consumer sentiment and global economic uncertainty is making consumers much more cautious.”

About the Author

Peter Sarmas is a Certified Property Investment Advisor (PIAA) and Vendor/Buyer Advocate. Before becoming the founder of Street News, Peter completed a Degree in Applied Science (Chemistry) and a Graduate Diploma in Property Valuations (Hons). Peter believes property investing is a major and potentially risky undertaking. In his view, everyone should have an independent person acting on their behalf when seeking property investment advice.

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