The effect of consumer confidence on our housing markets | Michael Matusik


It often takes a study or a new set of statistics to confirm what many of us already know.

Last week’s latest consumer confidence results are a case in point.

There are two regular and reliable measures of the nation’s mood; both of which, interestingly, are sponsored by a major bank.

The first is by ANZ-Roy Morgan and the second by Westpac-Melbourne Institute.  They are both indices; they measure similar things; and more often than not, show similar trends.

In this Missive we have used the Westpac-Melbourne Institute (WMI) survey.

Confidence is falling

Our first chart shows that confidence is falling.

We are increasingly anxious about jobs, the housing market, our family’s finances and our economic future.

Not surprisingly, this places a damper on our overall mood.

I am more peeved that I will have to wait until after Christmas for the new Bob Seger album to arrive (he doesn’t do iTunes), but my petty grievances can wait.

For those who like a bit more technical detail than our simple – confidence is falling – summary, overall consumer sentiment, according to the WMI index, is currently at 96.6, which is at its lowest level since mid-2011 when it fell below 90.

A confidence index measure of 100 means that half of those surveyed are optimistic whilst the other half are pessimistic.

We now have a glass which is clearly less than half full.

This dour reading – and more importantly the steady decline in the national confidence (again, revisit chart one) – will have a range of significant impacts on the Australian housing market.

Things have changed

Optimism around the housing market appears to have price down

True, many have embraced property over the last year or two, as evidenced by the rapid rise in investment loans.

The rapid rise has caused some angst and maybe a polarisation of investment choices. 

When asked to select the ‘wisest’ place for savings, the most recent WMI survey found that 60% said either a bank (35%) or real estate (25%).

Furthermore, just one in every five think that now is a good time to buy a dwelling.  This is down by 11 index points in recent months.

As a result, the outlook for house prices has fallen too, down a big 23% over the past twelve months.

Strong correlations

There is a very strong correlation between confidence in new housing construction; housing finance and especially dwelling price growth.

In all three instances – see charts 2, 3 and 4 above – confidence leads things by around six months.

Next year

Last year, the residential property market started with a bang.

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Confidence was rising at the time.  Now the reverse is taking place.

Whilst we expect some markets (due to their position in the overall property cycle) to trade well next year, our four charts above suggest that 2015 will not start with the same fire power as 2014 did.

Having said that, our national mood can be a fickle thing and it is possible that we will see confidence bounce back after Christmas.

It would need a massive jolt north, however, to reverse the current trend.

If our confidence remains weak (worse still, if it weakens further), then it adds further weight to the premise that the Australian housing market is close to its peak.

You may also be interested in:

How important is consumer confidence for our property markets

The importance of consumer confidence to our housing and mortgage markets


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Michael is director of independent property advisory Matusik Property Insights. He is independent, perceptive and to the point; has helped over 550 new residential developments come to fruition and writes his insightful Matusik Missive

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