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There has been a sudden turnaround in housing sentiment despite the favourable market conditions, according to the latest Quarterly Property Sentiment Report from ME Bank.
Overall sentiment among buyers and sellers dropped over the last three months from the record high achieved in the first quarter of 2021. First-home buyers reported the lowest level of positive sentiment while investors recorded the highest.
Claudio Mazzarella, head of home loans and personal banking at ME Bank, said this was opposite of what happened last year when prices started to fall due to the pandemic.
"When property prices and interest rates lowered last year during the pandemic, a unique buying opportunity opened up for confident first home buyers with cash savings and secure employment, while many investors became nervous," he said. "Now prices have rebounded strongly and affordability is going down, first home buyers aren’t feeling as positive."
The report showed an increasing worry about the availability of residential properties. In fact, around three in five of Australians believe there is not enough choice in the current market. This was apparent among regional buyers, particularly in New South Wales.
"With more city dwellers moving to sea or tree change areas, supply is dwindling and adding pressure to prices," Mazzarella said.
Given the perceived lack of supply, affordability becomes a concern for 91% of Australians. More than 60% of homebuyers expect prices to increase in the next 12 months.
While the increasing house prices spell bad news for first-home buyers, the trend has an opposite impact on existing homeowners and investors.
A quarter of investors want to cash in on high prices as they plan to sell their property in the next 12 months.
"Rising prices are making property owners feel wealthier, when many buyers are stretching their budgets to afford the limited but growing availability of stock on the market at the moment," Mazzarella said.
