Consumer Sentiment And Hope For The Property Market

With the Westpac-Melbourne Institute Consumer Sentiment index released for August 2015, what does a slight rise in the overall confidence ratings mean to the Australian property seller or buyer?
“Surprisingly the consumer sentiment increased by 7.8% to 99.5 index points in August suggesting that the RBA’s decision to keep interest rates stable has returned society’s positive sentiment in the economy,” said Dr Diaswati Mardiasmo. “That’s a significant jump, and it is good news for us in the property market, as a stronger consumer sentiment signals stronger consumer tendency or willingness to spend.”

In Q2 2015 Australian consumer sentiment broke positive at 102.4 index points, however a significant fall took place in June and July (down to 92.2 index points) due to global issues associated with Greek and Chinese markets.

“Across our business in Australia, regardless of the location of the franchise office, what we’re hearing is that property owners respond to our market research which includes overall economic trends. This can assist our agents in explaining how they relate to buying or selling a home which also assists the consumer in making a fact-based property decision,” said PRDnationwide Managing Director Tony Brasier. “With all the hype surrounding the so called ‘property bubble’ our agents aim to be the property knowledge leaders to provide our customers with accurate market information, and understanding an economic indicator like consumer sentiment is a key to that relationship.”

An index of 100 is considered neutral, and the current reading (99.5) is very close to a balance among optimist consumers and the pessimists.

“Anytime the index goes up, it points to an increase in consumer spending, whether it’s on retail, property or any other goods,” said Dr Mardiasmo.

“With spending going up, that means property buyers may be willing to spend more. That leads to an increase in property interest and, potentially, the price a seller will obtain.”

Dr Mardiasmo explained that a recent slowdown in market growth across some areas of Australia, specifically in the Sydney and Melbourne areas, may be related to the decrease in confidence over June/July.

“However, it’s not as simple as interest rates or consumer confidence when it comes to the property market,” she said. “The index changes month to month and property sellers can use this information to gauge possible increases or decreases in the number of buyers for a property or days on market.

“There is a lot of hype that the market is at its hottest now and perceived pressure by home owners to put their property on the market now, but it’s good for sellers to understand what consumer sentiment means.”