Homebuyer confidence softens, while house price expectations reach new highs
Australian consumer confidence slipped in September, with renewed worries about the economic outlook tempering recent gains in household finances and homebuyer sentiment.
The Westpac–Melbourne Institute Consumer Sentiment Index dropped by 3.1% to 95.4 in September, returning the index to what analysts describe as ‘cautiously pessimistic’ territory.
This shift was largely attributed to a more negative view of the economy’s prospects. Expectations for economic conditions over the next year dropped 8.9%, while the five-year outlook fell 5.9%. These changes mark a move from neutral to more pessimistic sentiment among respondents.
“Outright optimism remains elusive,” said Matthew Hassan (pictured above), head of Australian macro-forecasting at Westpac. “The cost-of-living crisis may be largely over and policy easing generating some uplift but there is still clearly some unease about the path ahead.”
Despite some improvement in household finances – reflected in a 2.6% rise in assessments compared to a year ago and a 0.9% increase in expectations for the next 12 months – optimism remains limited. Both measures are now close to their long-term averages, indicating only modest progress.
Homebuyer sentiment softened, with the index measuring the ‘time to buy a dwelling’ falling by 1.7%. Victoria was the only state to record a positive shift, while New South Wales remained neutral and other states, including Queensland, Western Australia, and South Australia, reported more negative readings.
In contrast, expectations for house prices continued to strengthen. The index tracking anticipated price movements rose 2.6% to its highest level in 15 years. Over three-quarters of respondents expect prices to increase in the coming year, with particularly strong sentiment in South Australia and Queensland.
Westpac’s latest consumer insights also showed a slight easing in risk aversion among consumers, though it remains elevated. Most respondents still prefer safe options for savings, such as bank deposits or paying down debt, though there was a small uptick in those favouring superannuation. Interest in riskier assets, including real estate and shares, remains subdued.
Labour market confidence also weakened, with the unemployment expectations index rising 4.6% to align with its long-term average. This suggests a growing number of Australians expect joblessness to rise over the next year.
Expectations for mortgage rates shifted as well, with more consumers anticipating rates will stay the same or decline in the next 12 months, although this proportion has fallen since the previous survey.
Looking ahead, Westpac expects the Reserve Bank of Australia to keep the cash rate steady at its September meeting, with further reductions likely later in the year and into 2026 as the consumer recovery progresses slowly.
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