Home buyer confidence stumbles

Adam Smith 7 April 2016

home buyer confidence stumbles

Home buyers are feeling less confident in spite of a long period of low interest rates.

New research shows potential home buyers are feeling less confident about the housing and mortgage market. The Genworth Streets Ahead Report has shown a decline in its Homebuyer Confidence Index following three consecutive increases from March 2014.

The decrease in confidence was driven by an 11% rise in the proportion of homeowners who said they have experienced mortgage stress, a 13% increase in the proportion of owners who say they expect to experience stress and a 13% fall in the proportion of respondents who believe now is a good time to buy a home.

“The proportion of those who believe it is a good time to buy a home has fallen to 42%, from 48% six months ago. This sentiment is even more pronounced amongst investors, with those who believe it is a good time to invest in property falling by 18% to 36% in the same period,” Genworth’s chief commercial officer Bridget Sakr said.

Key findings
  • There’s been an 11% rise in proportion of homeowners who said they have experienced mortgage stress
  • The proportion of home owners who expect to experience mortgage stress rose 13%
  • The proportion of potential first home buyers who believe now is a good time to buy fell from 67% to 50%
  • 24% of first home buyers expect to experience mortgage stress in the next 12 months

Sakr said media speculation about the existence of a housing bubble, as well as an upcoming national election and proposed changes to negative gearing policy and a tightening on investment lending has likely driven the change in consumer confidence.

High prices in the Sydney and Melbourne markets have also proven to be a drag on confidence, the report found. These high prices mean accessibility (the ability to enter the property market) rather than affordability (the ability to make repayments on a home loan) remains the key barrier to purchasing a first home.

“One third of respondents indicated that high property prices are the greatest barrier to homeownership, while a quarter suggested the barrier is saving for a deposit. The difficulty in saving a deposit has increased by 20% since September 2015,” Sakr said.

First home buyers face particular difficulty in saving a deposit, with the proportion of first-time buyers who tipped saving a deposit as the biggest barrier to ownership increasing by 82% over the past 12 months.

“There is no doubt that saving a deposit remains a key barrier for FHBs looking to enter the market. This clearly indicates there is a need for more consumer education on the many low deposit options available to them, such as Lenders Mortgage Insurance (LMI). It is up to LMI providers, lenders and brokers to ensure prospective FHBs are aware of all of their options when it comes to purchasing a home or investment property,” Sakr said.

What is LMI?

To find out more about buying a home with a minimal deposit, check out our guide on lender's mortgage insurance (LMI).

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