New research highlights just how much Australian house price expectations have changed before and during COVID-19.
Switzer Financial Group’s first Switzer Fear, Greed & Hope survey, initiated in February 2020, showed that 65.9% of the 2,500 respondents surveyed thought property prices would increase overall in the coming 12 months, with just 4.7% expecting a fall.
Now, the exact opposite seems to be the case.
The second survey, conducted in May, found that 54% of respondents think prices will drop over the next 12 months, with less than 10% predicting an increase.
Between 30-40% of respondents thought prices would remain roughly the same in both surveys.
“In February 5% of Aussies thought house prices would fall and 66% expected prices to rise but in three months more than one in two think prices will fall. That’s an astounding turnaround," Switzer Financial Group Director Peter Switzer said.
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Base criteria of: a $400,000 loan amount, variable, principal and interest (P&I) owner-occupied home loans with an LVR (loan-to-value) ratio of at least 80%. If products listed have an LVR <80%, they will be clearly identified in the product name along with the specific LVR. Monthly repayments were calculated based on the selected products’ advertised rates, applied to a $400,000 loan with a 30-year loan term.
Various recent studies by major banks show these fears over falling property prices might not be too hysterical:
- A worst-case scenario from Commbank shows a 32% fall, and an 11% fall in a better scenario
- NAB's worst-case scenario shows a 30% price fall and 10% in better circumstances
- ANZ said house prices would drop by just 10% nationally, but Sydney and Melbourne would be worse hit, dropping 13%.
Source: Switzer Financial Group
The report sought to uncover investor attitudes towards markets and the economy over a three month period, and the coronavirus restrictions and worldwide shutdowns have seen some interesting changes.
With so many Australians expecting prices to fall, property has also fallen out of favour compared to other investment options.
According to the results, 10.5% would invest in property right now, compared to 62.7% in shares, 10.1% in term deposits and 16.4% in “other”, which could be things like bonds or fixed interest.
“The big surprise here is that, after the coronavirus, more Australians feel comfortable investing in stocks over property,” Mr Switzer said.
"As someone who has canvassed the view that the stock market sell off was over-the-top, the fact our market is now out of bear territory is satisfying.
"But I’m even more knocked out by the fact that investors haven’t been petrified by the Coronavirus, with our latest Switzer Fear, Greed & Hope survey showing that they’ve seen substantial buying opportunities."
The research also shows that the majority of respondents correctly predicted at least one of the Reserve Bank of Australia's (RBA) March rate cuts.
Almost 70% (68.2%) said interest rates would be cut prior to the Reserve Bank’s record-breaking interest rate cuts.
Now, Australians are more torn, with 56.1% anticipating interest rates to move higher and 43.8% predicting another drop (the RBA has strongly hinted it won't be lowering the cash rate any further).
Talking lockdowns, 64.3% of respondents felt Australia's restrictions were lifted at the right time, while 17.8% believe restrictions were lifted too early or too late (that's exactly 17.8% for both).
The entire market was not considered in selecting the above products. Rather, a cut-down portion of the market has been considered which includes retail products from at least the big four banks, the top 10 customer-owned institutions and Australia’s larger non-banks:
- The big four banks are: ANZ, CBA, NAB and Westpac
- The top 10 customer-owned Institutions are the ten largest mutual banks, credit unions and building societies in Australia, ranked by assets under management in November 2020. They are (in descending order): Credit Union Australia, Newcastle Permanent, Heritage Bank, Peoples’ Choice Credit Union, Teachers Mutual Bank, Greater Bank, IMB Bank, Beyond Bank, Bank Australia and P&N Bank.
- The larger non-bank lenders are those who (in 2020) has more than $9 billion in Australian funded loans and advances. These groups are: Resimac, Pepper, Liberty and Firstmac.
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Some providers' products may not be available in all states. To be considered, the product and rate must be clearly published on the product provider's web site.
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*Comparison rate is based on a loan of $150,000 over a term of 25 years. Please note the comparison rate only applies to the examples given. Different loan amounts and terms will result in different comparison rates. Costs such as redraw fees and costs savings, such as fee waivers, are not included in the comparison rate but may inﬂuence the cost of the loan.
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