Consumer hopes and concerns

Every year we survey over 1,000 consumers, via an independent market research company, on how they feel about the upcoming year and what financial plans they are making to meet it with confidence.

The Mortgage Choice Consumer Sentiment Survey completed in November 2008 was even more interesting than those of previous years given the current global financial turmoil.

So what did these consumers, across all ages and income levels from all around Australia, have to say about the year they are facing?

One of the most surprising results was that almost one-third (31 per cent) will buy a property before 2009 is over, despite concerning ‘credit crunch’ conditions seeing many people revisit their financial plans. Sixty-five per cent of these potential property purchasers will buy investment properties.

Today’s economic situation has certainly affected consumer confidence, but our results show the slide in sentiment is perhaps not as marked as some would expect, nor is the percentage of those deterred from buying property.

Overall, housing prices are relatively steady — especially when observed on a year-on-year basis — and to many consumers this market appears more stable than the stock market, while interest rates are falling and rental vacancies remain historically low.

Currently, a large number of regions are experiencing a ‘buyer’s market’. Many people recognise that and plan to take advantage of it.

Of the respondents, of whom 86 per cent were property owners and 75 per cent had a mortgage, almost two-thirds said the credit crunch had made property seem safer than shares.

Despite commentary around expected housing price falls, almost one-third of respondents plan to enter the property purchase process in the next year. However, this was down on last year’s figure of 44 per cent. Males were 10 percentage points more likely to be planning a purchase, perhaps, in part, because they earn a higher wage on average.

Forty-one per cent of property owners will renovate their existing property rather than purchase a new one.

Illustrating consumers’ cautious approach to their spending habits, of the respondents who were current mortgage holders, almost three-quarters (72 per cent) were not going to decrease their mortgage repayments to match the September, October and November 2008 rate cuts. You would expect this trend to remain fairly unchanged despite the December rate cut.

Regardless, 70 per cent of mortgage holders will make changes to their financial situation over the year to November 2009, while 20 per cent were not sure if they would.

Eighty-three per cent of respondents believed rates would fall between December 2008 and December 2009, with females more conservative with their predictions of how much.

Overall:

• 30 per cent predicted a drop of between 0.5 per cent and 1 per cent;
• 23 per cent predicted between 1 per cent and 1.5 per cent;
• 21 per cent said between 0.25 per cent and 0.5 per cent;
• 15 per cent said between 1.5 per cent to 2 per cent; and
• 6 per cent said between 2 per cent and 3 per cent.

With the Reserve Bank’s 100 basis point rate cut in December matched (or almost matched) by most lenders, and with much talk of rates falling by at least another 100 basis points in the next six months, it appears the majority of respondent predictions will fall short of the situation we expect to see by mid-2009.

Half the respondents (51 per cent) expected housing prices to fall over the next year while 26 per cent expected them to remain stable. Only 15 per cent expected prices to rise while 8 per cent were not sure.

We are facing a tumultuous year, one we hope will show signs of economic recovery at some point. It will be very interesting to look at these results a couple of quarters down the track and see what expectations and fears these Australians were correct and justified about.

Kristy Sheppard is senior corporate affairs manager at Mortgage Choice.