Streets Ahead : Streets Ahead Edition 12
Overall Genworth Homebuyer Confidence Index movement The proportion of Homeowners who experienced mortgage stress rose to 20% (from 18% in September 2015) with the main drivers including: • higher cost of living (37% down slightly from 38% in September 2015) • other debt obligations (21% up from 19% in September 2015). The proportion of Homeowners who expect mortgage stress rose to 18% (from 16% in September 2015) with the main drivers including: • higher cost of living (39% unchanged from September 2015) • fewer hours worked or less pay for the same work (17% up slightly from 16% in September 2015). The proportion of respondents who believe it is a good time to buy a home fell to 42% (from 48% in September 2015), with the main drivers including: • low interest rates so can repay the loan faster (49% down from 53% in September 2015) • belief that property prices will only increase in the future (43% down from 47% in September 2015). The fall in the Genworth HCI comes despite the official cash rate remaining at 2.00% since the RBA cut rates in May 2015 from 2.25%, and is likely partially due to lenders increasing interest rates out of cycle with movements in the official cash rate. At the same time, the CoreLogic RP Data Home Value Index shows that median dwelling prices across all capital cities increased by 1.4% over the quarter to 29 February 2016 and by 7.6% year-on-year. However, the rate of house price appreciation is moderating, falling from 11.1% to 7.6% over the past seven months. Despite this trend, high house prices continue to hamper accessibility into the housing market, therefore dampening consumer confidence. John Arnott, Executive Director, Customers, at ING Direct, gives one explanation for the dip in consumer confidence: “People generally go into the homebuying cycle with a view that they’re not only going to purchase a home for themselves, but also there’s an assumption that there will be some kind of capital gain. I guess the fear that is being fuelled by media is that people will be purchasing their first home and that there could be a fall in prices within the next six months. That will have a knock-on effect on confidence”. Figure 1. Genworth Homebuyer Confidence Index Streets Ahead | Genworth Homebuyer Confidence Index - March 2016 4 March 2016 saw the Genworth HCI fall for the first time since March 2014. Following a post- GFC high of 99.6 in September 2015, the Genworth HCI dropped to 98.2 in March 2016. The fall was driven by an increase in both experienced and expected mortgage stress, as well as a drop in the number of respondents who believe that now is a good time to buy a home. Source: Genworth Note: Chart shows the Genworth HCI as at March 2016 (98.2), all-time low in March 2014 (90.8).
Streets Ahead Edition 11