Westpac warns Australia’s housing market is losing momentum

Australia’s housing market has fallen into “tricky territory” amid continuing lockdowns and the housing affordability crisis, a new study has found.  

The Westpac Quarterly Housing Pulse showed the ‘time to buy a dwelling’ index, which revealed Australian’s plans to buy a home were at the second-lowest point since 2010. 

The reported indicated we will see a temporary loss of momentum for the housing market boom, which will likely snap back once restrictions ease.

The ‘time to buy a dwelling index’ dropped a further 14.1 per cent over the three months to August. The previous three months also saw a similar drop.

Westpac has warned the steep fall is a clear warning that deteriorating affordability is starting to weigh heavily on sentiment among owner-occupiers.

Restrictions have had a notable impact on the market, but affordability issues and subsequent buyer sentiment has had more sway on the current market environment.

With many people in lockdown struggling with job security, Westpac found their risk aversion has increased.

Victoria and New South Wales

The Westpac Melbourne Institute Unemployment Expectations index fell 24.3 per cent over the three months to August, meaning more respondents believe unemployment rates are set to rise.

Affordability has become a major concern in Melbourne and Sydney. Both cities are in lockdown but have also had house prices soar to record levels over the past 12 months. 

Demand in New South Wales, which has become the epicentre of the Delta variant, continues to run well ahead of on-market supply. Despite the lockdown, sales have outstripped new listings by about 20 per cent.

Meanwhile, the Victoria Consumer Housing Sentiment index has backed off its highs but remains relatively upbeat.

That suggests ‘underlying’ momentum should be reasonably well supported over the medium term.

Westpac auction market information up to 22 August showed Sydney and Melbourne markets hit hardest by the latest outbreak, with the latter also offering a useful point of comparison with last year’s second wave lockdown.

The latest weekly data suggests turnover in the Sydney market is down about 30 per cent on its May level.

This was still milder than the 50 per cent slump seen during last year’s national lockdown and the further fall seen during Melbourne’s second wave outbreak. Remarkably, turnover is still above the average levels seen in 2019. 

Other markets

Affordability was also stretched in other capitals, with house prices in Hobart and Canberra skyrocketing by almost 30 per cent over the year to June, while Brisbane and Perth house prices also grew by double digits.

Queensland’s housing markets have maintained strong gains. The state’s COVID battles have been less debilitating with more sporadic lockdowns, less often and much shorter in duration than in NSW and Victoria.

The latest price detail shows a marked pickup in momentum for houses and for middle and top tier properties in Brisbane.

Westpac suggested the recent announcement that Brisbane will host the 2032 Olympic Games may well be creating a halo-effect for what is already a strong market.

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