For the first time in a year, the Westpac Melbourne Institute Consumer Sentiment index reflects that the ‘Time to buy a dwelling’ reading has dropped below 100 and into negative territory sitting at 96.1. This is the fifth monthly decline in a row, dropping 7.4 points from 103.5 in May. The index is now 36 points or 27% below its November high of 132, showing the sharp contraction in buyer perspective.  

The shift in sentiment is mainly caused by rapid price rises this year, that we first predicted in late September. This pessimism is also supported by fringe factors including increased fixed rates, with speculation of more increases to come, and various government incentives coming to an end. 

This index generally is a forward indicator of markets which means any price increase contraction is likely to play out over the second half of this year, and probably into the first half of next year. The shift in consumer attitude suggests the possibility of the potential for sanguine value growth, without the requirement of intervention from APRA placing restrictions on borrowers.  

This forward leading indicator certainly suggests we have reached the peak of price growth. 

The big question now is how long will the sentiment take to flow through to the market?