Majority of Australians feel the housing market is heading for a downturn

Two thirds of Australians now think the housing market is vulnerable to a sustainable downturn with the sentiment affecting all regions of the country, a new poll shows.

While the survey results suggests that respondents are concerned about a crash in home values, this remains unchanged from a year ago, and lower than the 68% of respondents who indicated ‘yes’ to this question six months ago.

The higher proportion of respondents who were concerned about a large correction in the housing market was broad with all regions indicating at least 61% of respondents were concerned about a housing market crash, according to the CoreLogic-TEG housing market sentiment survey.

The result indicates that a significant proportion of the community are wary of substantial value falls across the nation’s largest and most important asset class, which according to CoreLogic RP Data is currently worth an estimated $6.5 trillion.

Recent housing market forecasts from CoreLogic RP Data and Moody’s Analytics indicate dwelling values are likely to experience falls, however the peak to trough declines are likely to be short lived and relatively slight, followed by a longer period of relatively sedate housing market conditions.

Home values are already trending lower in Perth and Darwin with both cities recording a peak to current fall of 4.6%. Additionally, the pace of capital gains in Sydney and Melbourne, where dwelling values have surged higher over the past two growth cycles, is moderating in what has been a controlled trajectory to date.

The survey also revealed a slowdown in the proportion of survey respondents who think now is a good time to buy; 61% indicated they would consider buying a home, however a year ago the reading was much higher at 71%.

Perceptions around buying conditions worsened across most regions over the past 12 months, with Tasmanian and Sydney buyers the most pessimistic about buying conditions. Only 40% and 50% of respective respondents in these cities indicated they felt it was a good time to buy.

However, buying sentiment improved over the past year in some of the weakest markets where listing numbers are higher and housing prices have reduced. The proportion of survey respondents who indicated that current market conditions represent a good time to buy increased by 1% over the year in Perth while buyer sentiment in the Northern Territory increased by a substantial 20% compared with a year ago.

When survey respondents were asked whether they thought home values would rise, fall or remain stable over the coming six and 12 months, most respondents expect values to remain stable, however 17% of respondents are expecting values to fall over both the next six and 12 months.

A year ago, 49% of survey respondents were expecting dwelling values to rise over the coming six months compared with only 31% over the most recent quarter. Respondents based in Sydney have seen the most substantial deterioration in the proportion expecting values to rise over the next half year. A year ago, 66% of all Sydney based respondents were expecting values to rise over the next six months compared with only 31% over the most recent March quarter.

Survey respondents are also expecting relatively flat rental conditions, with 49% indicating they thought weekly rents would remain unchanged over the year. Only 8% of those surveyed thought rents would fall over the next 12 months.

The responses reinforce the CoreLogic RP Data rental analysis which showed capital city rents were down 0.2% over the past year, the first annual fall in capital city rents since the CoreLogic series began in 1996.

Finally, the survey indicated an expectation that mortgage rates are likely to remain on hold over the next 12 months. Almost two thirds of survey respondents are expecting mortgage rates to remain steady over the coming year while just over one quarter are expecting mortgage rates to rise. A year ago only 41% of respondents were expecting a stable mortgage rate setting over the coming year.

Very few, 7% of respondents, are expecting mortgage rates to move lower over the next year, signalling a growing belief that mortgage rates may be at the bottom of the cycle. At the same time last year, 27% of survey respondents were expecting mortgage rates to move lower.

‘With bank funding costs moving higher, there is some risk that mortgage rates will increase outside of any movements from the Reserve Bank’s overnight cash rate,’ said CoreLogic RP Data Asia Pacific research director Tim Lawless.