'Time to buy a dwelling' sentiment improves but unlikely to flow through to purchases: Westpac’s Bill Evans

Two successive rate cuts helped lift consumer sentiment about buying a house or unit in June but have had little impact on overall consumer sentiment, according to the latest Westpac Melbourne Institute Index of Consumer Sentiment. 

Responses to questions on “time to buy a dwelling” and “time to buy a car” both showed an improvement in June, with these indexes rising 8.2% and 7.5% respectively. 

The “time to buy a dwelling” index now stands at 128, compared with 118.2 in May and 115.4 in June last year, well above the historical average of 122.3. 

The overall index increased by just 0.3% from 95.3 in May to 95.6 in June and is well down on the 101.2 level recorded a year ago and the historical average of 101.7. 

The latest survey of 1,200 adults over 18 was conducted in the week from June 4 to June 10. The RBA cut the cash rate by 25 basis points to 3.5% on June 6.

“Lower interest rates and lower prices are clearly improving affordability and buyer sentiment on both fronts although buyers will tend to be reluctant to follow through on purchases while there are concerns about the economic outlook and job security,” says Westpac chief economist Bill Evans. 

Commenting on the overall consumer index, Evans says “clearly other factors are dominating rates in the minds of consumers – those factors are concerns about the domestic economy and international conditions”. 

Evans says the June survey included additional questions on “news” categories recalled and whether news was assessed to be favourable or unfavourable. 

“The results show negative news around the economy and international conditions dominated.” 

“This is another disappointing result. It follows a second consecutive cut in the official cash rate by the Reserve Bank.” 

“Sentiment has risen only 1.1% from its April level and remains 1.7% below the level recorded in October last year despite a 125-basis-point reduction in the cash rate that has brought the average standard variable mortgage rate down by nearly 1%,” says Evans.