Australians hesitant to buy property amid weak confidence in the housing market

Shaky confidence in the property market’s resilience against COVID-19 and the economic downturn has delayed Australians’ property plans, a new study suggests.

About 60 per cent of Australians expect property prices to fall between April and September, a survey by Budget Direct of 998 people showed.  More than 43 per cent believe the market will decline by up to 20 per cent and another 13 per cent reckon prices will drop by more than 20 per cent. 

A smaller proportion also tipped housing values to shoot up, with more than one in 10 expecting prices to grow by up to 15 per cent, and eight per cent believing that the market will surge by more than 15 per cent.

Nearly a quarter of those surveyed don’t think housing values will change in this period.

The findings somewhat align with NAB’s latest Residential Property Survey for the three months to June 2020, which showed that the bank’s Residential Property Index plunged to a survey low of -33 points, down from 38 in the first quarter.

Rising unemployment, job uncertainty and consumer confidence were among the most important perceived impacts for the future real estate market.

NAB has tipped housing values to fall by 10 to 15 per cent over the next year.

Despite the relative lack of confidence, property prices across the combined capital cities are still in positive territory when looking at longer term numbers. House prices shot up by 6.6 per cent in the 12 months to June, while unit prices are up 4.5 per cent, the latest Domain Group data showed.

However, real estate values in the past quarter were less optimistic, with house and unit prices falling by 2 and 2.2 per cent respectively.

Property plans on pause

Notably, Australians are sitting tight on their property plans. About 85 per cent of Australians don’t intend to buy or sell property before September, according to the Budget Direct poll.

Seven per cent have plans to make a purchase, while three per cent are intent to sell. Nearly 4 per cent want to trade their properties, and will both buy and sell.

For those who had been planning to buy or sell before the pandemic, about a quarter haven’t changed their minds since. Almost one in 10 have decided to delay their property plans for up to 12 months, while another eight per cent are riding out uncertainty by staying put for more than 12 months.

Similar research by J.D. Power indicated that 17 per cent of Australians are postponing their plans to buy a home. Meanwhile, one in five are delaying a home renovation, despite the government’s HomeBuilder grant.

If you intend to pause your property plans, it could be worth thinking about growing a larger deposit until the time is right for you. A sizeable deposit and a positive history of consistent saving can help prove that you’re a reliable borrower to the lender.

Other people may want to dive into the property market at a time when several mortgage rates on the market are starting with a one. The lowest fixed rate on the RateCity database, from Homestar Finance, dipped to 1.98 per cent, though this rate is fixed for one year and reverts to 2.49 per cent. 

Before making a decision, it’s best to consult a professional financial adviser or mortgage broker to assess your personal financial situation.

Many coping with property-related expenses

While many are choosing to hold their property plans, the financial situations of Australian mortgage-holders and renters are largely stable, bar some longer-term concerns. Two thirds indicated that they are able to afford their property costs, including mortgage payments and rents, the Budget Direct study showed.

About seven per cent said they were struggling to make these payments, while a quarter are unsure, a sign of uncertainty among many people over their personal finances and the pandemic’s impacts on the economy in the long run.

Nearly 90 per cent of those surveyed are not relying on government financial support.

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