First home buyers still think housing is too expensive, despite property prices falling at a historically fast rate.
That’s the finding of a survey by industry super fund-linked ME Bank, which also indicated 84 per cent of people agree say housing affordability is worsening.
This comes as house prices across the country experience a decline after a boom period.
According to CoreLogic, Sydney property values increased by almost 65 per cent over five years leading up to January 2018 and Melbourne housing prices increased by 56 per cent.
Now, national dwelling values are down 4.2 per cent since peaking in October last year, retracting back to levels last seen in December 2016.
Tightening in lending restrictions, weak clearance rates and foreign interest drying up has created a scenario in contrast to that seen in recent years.
The leveling of house prices means good news for aspiring home owners, but house buyers who purchased in the past three years are the most worried by about the impact of prices falling, particularly in Sydney and Melbourne.
“With price falls in Melbourne and more significantly Sydney, it’s understandable 75 per cent of first home buyers concerned about overpaying right now are more hesitant in buying,” said ME bank’s head of home loans Andrew Bartolo.
In the survey of 1,500 Australians who either own a home, or are looking to buy a home, 77 per cent of first home buyers said they are ‘worried that housing is increasingly out of reach’.
In a sign that ongoing price falls may hit consumer spending, 49 per cent of respondents said falling prices made them feel less wealthy, while 73 per cent said they would be more careful with their money in future.
Most of the respondents in the survey thought the market will bounce back, with 38 per cent saying prices will go up, 26 per cent saying prices will fall, and 23 per cent saying prices will stay the same.
Those who think prices will go up outnumber those who think prices will fall in states except NSW, suggesting the reality of price falls in that state has affected future sentiment.
Bartolo says property is a long game and there’s little point worrying about what happens to prices short-term.
“The Australian property market has seen seven price declines-recover cycles in Sydney since 1984 and all have seen prices recover, most within four years.
“When it comes to financial stress banks take a long-term view, focusing on the strength of the economy and healthy employment rather than house prices.”
He offered advice to home buyers looking to get a home loan.
“Those looking to borrow should ensure they have a strong savings history, a deposit over 20 per cent, and can demonstrate they can keep their levels of expenditure to low levels long-term.”