Homebuyer confidence waning

The majority of first homebuyers consider home ownership to be realistic, but continue to struggle to save for a deposit.

The Genworth Homebuyer Confidence Index decreased slightly by 1.6 points from September 2013 due in part to a decline in confidence in the first homebuyer segment and cost of living pressures for mortgage holders.

The results of the survey, based on the responses of 2000 consumers, also show that the majority of borrowers surveyed believe getting into the property market is harder now than it was for the previous generation, with 49% of respondents citing the rising cost of living as the key driver of mortgage stress. Meanwhile the proportion of those surveyed that thought that now was a good time to buy a home fell from 46% in September 2013 to 42% in March 2014.

“The marginal decline in confidence was driven largely by homebuyers experiencing or expecting mortgage stress,” said Genworth Australia chief commercial officer, Bridget Sakr. “The high cost of living has remained the number one cause of mortgage stress for homeowners since September 2011,” she added.

The Index fell from 92.4 to 90.8 points, with the first homebuyers component falling from 85 in September 2013 to 82.3 in March 2014. This drop in first homebuyer sentiment was driven primarily by concerns around underemployment. Around four in 10 borrowers continue to make overpayments to their mortgage, despite mortgage stress being cited as a common experience.

Sakr notes that while 71% of first homebuyers consider the dream of home ownership to be realistic, this group continues to struggle to save for a deposit. Around three out of 10 prospective first homebuyers believe it would take them four years or longer to save a 20% deposit, compared to 60% who feel it would take them at least four years.

Confidence is falling in older generations too, as currently only 37% of baby boomers and 40% of generation X feel that they are in a financial position to help the next generation buy their homes. “The struggle to enter the property market may also be exacerbated by any future dwelling price growth,” said Bridget Sakr.

“This ongoing challenge for prospective first homebuyers highlights the value of low deposit options...which can help people enter the property market sooner,” said Bridget Sakr.

The survey looks at the proportion of monthly income borrowers use to service debts, their repayment history over the last 12 months and expectations for the next 12 months. It also surveys whether consumers believe that now is a good time to buy a home and the maximum loan-to-valuation ratio borrowers are comfortable borrowing.