That was one of the key findings from ME Bank's latest Quarterly Property Sentiment Report, which tracks how Australians are feeling about the housing market.

Based on a survey of 1,000 investors, owner occupiers and first home buyers, ME found the overall sentiment of buyers and sellers in the residential property market dropped by 7 percentage points to 42% over the last three months.

And it's first home buyers who are feeling the most burned out, with 34% feeling negative about the property market.

That's the highest level since 2019, and follows record high sentiment just a few months ago when property prices began to boom.

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Update resultsUpdate
LenderHome LoanInterest Rate Comparison Rate* Monthly Repayment Repayment type Rate Type Offset Redraw Ongoing Fees Upfront Fees LVR Lump Sum Repayment Additional Repayments Split Loan Option TagsFeaturesLinkCompare
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Important Information and Comparison Rate Warning

Base criteria of: a $400,000 loan amount, variable, fixed, principal and interest (P&I) home loans with an LVR (loan-to-value) ratio of at least 80%. However, the ‘Compare Home Loans’ table allows for calculations to be made on variables as selected and input by the user. Some products will be marked as promoted, featured or sponsored and may appear prominently in the tables regardless of their attributes. All products will list the LVR with the product and rate which are clearly published on the product provider’s website. Monthly repayments, once the base criteria are altered by the user, will be based on the selected products’ advertised rates and determined by the loan amount, repayment type, loan term and LVR as input by the user/you. *The Comparison rate is based on a $150,000 loan over 25 years. Warning: this comparison rate is true only for this example and may not include all fees and charges. Different terms, fees or other loan amounts might result in a different comparison rate. Rates correct as of . View disclaimer.

ME’s Head of Home Loans and Personal Banking Claudio Mazzarella said the results are a stark turnaround from last year.

"When property prices and interest rates lowered last year during the pandemic, a unique buying opportunity opened up for confident first home buyers with cash savings and secure employment, while many investors became nervous," Mr Mazzarella said.

“Now prices have rebounded strongly and affordability is going down, first home buyers aren’t feeling as positive.”

Affordability concerns remain top of mind

Concerns around rising housing unaffordability aren't going anywhere.

An overwhelming 82% of home buyers surveyed said they ‘feel worried about paying too much for property in the current market’, while 93% of first home buyers agreed that housing affordability is a big issue in Australia.

These concerns are being compounded by low levels of stock on the market and expectations of further house price growth

More than two-thirds (67%) of those surveyed expect prices to increase in their area during the next 12 months - a 13% rise since January this year.

Meanwhile, 60% of people surveyed believe there 'isn't enough choice in the current residential property market’, up 17% since January.

A lack of properties on the market was found to be especially prevalent in regional areas, where buyers have been flocking to post-COVID.

“With more city dwellers moving to sea or tree change areas, supply is dwindling and adding pressure to prices,” said Mr Mazzarella.

Investors jumping back in

The report found investor confidence in the housing market is roaring back, coinciding with Australian Bureau of Statistics (ABS) data showing investor lending growth outpaced first home buyers for the first time in months. 

Over half (52%) of investors said they feel positive about the market, while 40% said they plan on buying in the next 12 months.

Investors appear to be looking to cash in on high prices, with 23% indicating they want to sell their property in the next 12 months, compared with only 11% of owner occupiers.

Mr Mazzarella said while first home buyers are losing confidence in the market as house prices surge, the effect on existing owners is the opposite.

"Rising prices are making property owners feel wealthier, when many buyers are stretching their budgets to afford the limited but growing availability of stock on the market at the moment,” he said.

Property owners’ ‘sense of wealth’ and ‘general financial confidence’ increased to the highest levels since ME’s survey began in April 2019 at 41% and 42% respectively. 

“Although overall sentiment is lower among first home buyers, our findings show they are still eager to buy property over the next year," Mr Mazzarella said.

“There’s also a sense of ‘fear of missing out’ in the current market, which can be a key driver for this behaviour."

ME’s findings revealed over half (58%) of those looking to buy ‘feel a sense of FOMO’ (fear of missing out) in buying property in the current market. 

Around 75% of those ‘looking to buy’ said ‘record low interest rates have made buying or investing in property more attractive to them.

Photo by Karolina Grabowska from Pexels

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