How sentiment shapes the housing market

While sentiment can fluctuate, the latest data from the realestate.com.au Residential Audience Pulse Survey highlights several positive trends.

Seller sentiment strong but beginning to soften

Recent survey results indicate that while some sellers express reservations about the market, notably in NSW and Victoria, where price growth has been modest, Tasmanian sellers are growing more confident. 

In Tasmania, the number of sellers who consider it a good time to sell increased by 15% in October.

The housing market in Tasmania has performed differently to other states recently and prices are now growing when all other markets are starting to slow.

Despite varying sentiments across states, the spring selling season of 2024 outperformed the previous year. 

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This robust activity underscores the resilience of the market, with both buyers and sellers remaining active despite fluctuating confidence levels. 

The anticipation of future price increases plays a role in sellers' decisions, although confidence in immediate price growth has softened since earlier in 2024.

In Western Australia, sentiment remains notably strong, with respondents asserting that current property prices are high, aligned with the substantial 17.6% growth in home values in Perth over the past year. 

The main reasons that sellers give for now being a good time to put their home on the market are personal circumstances and/or the need to sell, and the fact that prices are high at the moment.

Buyers remain optimistic, especially in SA and QLD

Buyer sentiment has remained steady, with approximately one third of buyers confident that it's a favourable time to purchase. 

Victorian buyers are particularly optimistic due to the plateau in price growth, with 40% affirming it's a good time to buy. 

In South Australia, buyer confidence surged by 48%, alongside increased activity in Queensland, where nearly a third of buyers feel positive about the current market.

Notably, sentiment trends reveal that buyers are primarily motivated by a desire for larger properties and the allure of more space, with one in five aiming to upsize. 

Simultaneously, Australia's aging population drives a growing demand for downsizing, influencing new development trends favouring luxury apartments and retirement living.

The demand for properties in regional areas of South Australia and Queensland is rising, driven by a desire to relocate closer to the beach or mountains, and retirement considerations. 

Affordable pricing in these regions compared to urban centres like Adelaide and Brisbane has increased buyer sentiment in these states.

Interest rates will be key to market prosperity in 2025

Interest rate expectations also play a significant role in shaping market sentiment. 

Buyer expectations of rising interest rates have decreased, with only 16% anticipating increases in the next six months, and a significant 67% expecting rates to stabilise or decrease. 

This easing of financial concerns is reflected in the declining number of buyers worried about rate hikes.
 
Similarly, sellers share a positive outlook on interest rates, with only 9% expecting hikes. 

A substantial 72% expect rates to remain stable or to fall, further solidifying seller confidence. 
 
This shared optimism towards interest rates bodes well for continued market engagement and transaction activity.
 
Although some buyers and sellers wait until they feel the market is most favourable, not everyone can wait until prices are right and interest rates are low.

The majority of respondents expect interest rates to remain the same or fall in the next six months. Picture: Getty.

The reality is that most people buy and sell at a time that is right for them, and this is why the market has been robust throughout 2024 despite high interest rates.
 
And the resilience and positivity demonstrated in certain regions provide an optimistic outlook for the housing market in 2025.
 
Strong performance in states like Tasmania and Western Australia, combined with steady buyer interest and moderated concerns over interest rates, paint a promising picture for the months ahead. 
 
Overall, the slight decrease in consumer sentiment is likely to contribute towards moderating price growth in 2025; however, PropTrack has predicted continued price growth throughout the year.

This article first appeared on realestate.com.au and has been republished with permission.