Australian Property News

Homebuyer confidence is back

Posted on Tuesday, September 07 2010 at 3:58 PM

Homebuyer confidence is back to pre-global financial crisis (GFC) levels, according to a new measure of borrower and would-be borrower sentiment launched by lenders mortgage insurer Genworth Financial.

The Genworth Homebuyer Confidence Index (GHCI) is based on consumer attitudinal data collected by the company over the past five years.

It shows that while homebuyer confidence is back to what it was before the GFC, cautious optimism should prevail with a number of signals suggesting confidence is on a delicate balance.

Results from the GHCI indicate that stronger employment was a primary driver behind the high levels of confidence with the index reaching 99.1 in 2010, down slightly from 99.5 in 2009 and from a baseline of 100.0 set in 2007.

“Higher levels of employment, lower interest rates and government stimulus helped first homebuyers to meet their mortgage repayments over the past year,” said acting chief executive officer Paul Caputo.

“If employment continues to improve however, this will put pressure on inflation and, in turn, current interest rate levels.”

While most borrowers have comfortably met their mortgage repayments, rising interest rates and the rising cost of living are a key concern for homebuyers.

The GHCI shows that the proportion of respondents who expect to experience repayment difficulties in the next 12 months has jumped from 15 per cent to 20 per cent over the past year.

Of these, the amount blaming the rising cost of living has increased to 61 per cent from 48 per cent in 2009, while 61 per cent also nominated interest rates.

Many would-be homebuyers are expected to get into a rental trap, with rent rises and increasing costs of living preventing them from saving a deposit.

The Genworth survey results indicate that saving for a home is harder than it was before the GFC, particularly as housing is getting less affordable.

Only 25 per cent of people thought it was a good time to buy a house in 2010, a steep plunge from the 50 per cent in 2009.