Fewer home buyers are making plans to enter the market amid an extended surge in listings – a record number of auctions is forecast for this weekend – putting a further dampener on runaway house price growth.
Home buying intentions plummeted by 27.5 per cent in November and by 17.7 per cent over the year, amid worries of higher interest rates, tighter credit and worsening affordabilit, according to the Commonwealth Bank of Australia’s latest survey of spending plans.
The decline in the CBA’s home buying intention index coincided with the drop in home loan applications at the bank and lower Google searches related to home buying.
Stephen Halmarick, CBA chief economist, said while the extent of the decline was likely overstated due to a shorter time frame of only four weeks, the data also showed moderation in demand for housing, particularly by owner-occupiers.
“We think the shorter time frame had an impact, particularly on the number of search activities, as people would normally sit down and do a lot of searching over the weekend, but when we look at other data – the pace of new lending to owner-occupiers and the speed of the price increases – it’s pretty clear that there’s some moderation in demand from homebuyers,” he said.
Shane Oliver, AMP Capital chief economist, said the slump in home buying intentions was consistent with other signs of a slowdown in the housing market.
“We’re seeing buyer interest is starting to suffer and that’s largely due to very poor affordability, as it’s simply pricing a greater and greater proportion of buyers out of the market,” he said.
“Then there’s been an ongoing drip feed of news about rising fixed rates and there’s a debate about when the Reserve Bank may raise the cash rate. And on top of all of this, you’ve got APRA moving to tighten lending standards.
”So I think in a broader sense, it is consistent with other indicators of slowing buyer interest. It shows the pool of potential buyers is getting smaller, and this is occurring at a time when there’s been more listings on the market.”
New listings rose across all capitals during November, with Sydney jumping by 3.8 per cent, Melbourne up by 2.3 per cent and Brisbane by 3 per cent, the latest data from SQM Research shows.
Across the country, listings under 30 days lifted by 2.3 per cent, although total listings dropped by 2.6 per cent during the month.
“We were expecting a fall in listings given the strong October numbers, but we’ve only seen a minor retreat and the count was stronger than expected, especially for Sydney,” said Louis Christopher, SQM Research managing director.
“This week alone, a record 6315 auctions are scheduled across the country – the biggest I’ve seen in my career. So, there’s a massive leap in supply relative to demand, and if it persists, then the slowdown and price falls we forecast next year will come early, but I’m cautious to say the downturn has arrived.”
Sydney-based buyer’s agent Amanda Gould of HighSpec Properties said there has already been a significant drop in buyer’s appetite.
“I would say buyer demand has fallen by about 20 per cent, so there’s definitely been a change in the market,” she said.
“During the peak, we were inundated with calls from clients, now, we have to chase buyers.”
Nicola Powell, Domain chief of research and economics, said buyers were likely feeling burnt out due to the rapid house price growth in the past two years.
“I think there’s absolutely a bit of buyer fatigue setting in,” she said.
“When you’re faced with the amount of price increases that we’ve seen over the past year, you know that the household balance sheet just doesn’t add up.
“I think buyers are also starting to realise they can take a bit more time making their decisions because we’re seeing that pendulum now start to swing towards buyers, with a surge in listings.”
By contrast, travel spending intentions rose by a further 14.7 per cent over the month, taking the annual growth to 25 per cent.
Dr Oliver said with the economy reopening, people’s priorities will be further diverted away from housing.
“During the lockdown, people allocated their spending away from services and travel towards housing, furnishings or cars, but with reopening, there will be a rotation away from these as people start thinking about travelling again, so the interest in housing might start to wane,” he said.
“House prices would probably keep going up for a while because there are still a lot of buyers out there, but pace of growth will slow as the market returns to balance.”