Homebuyer sentiment plunges to 18-month low amid interest rate fears

Homebuyer sentiment has dipped to “pessimistic” levels but broader consumer sentiment has ticked up from extreme lows, the latest Westpac-Melbourne Institute survey shows.

Released on Tuesday, the polling shows the general public feels “very mixed” on the effects of the federal budget.

Job loss fears have eased through May, but the figure sits above the long-run average, suggesting employees are still on edge.

“Housing-related sentiment is looking very unsettled, reflecting a mix of price declines in some major markets, actual and expected interest rate rises and some major tax policy changes affecting investor housing announced in the federal budget,” the researchers said.

“Homebuyer sentiment has weakened sharply, with the ‘time to buy a dwelling’ index dropping 16.1 per cent to 72, an 18-month low and nearly 50 points below the long-run average of 119.”

The monthly The University of Melbourne, the Melbourne Institute, and Westpac analysis points to strengthening consumer sentiment in May, up from extreme lows in April, as fuel prices fall.

“However, this positive would have been largely offset by the RBA’s 25bp rate hike at the start of the month, the third interest rate rise in as many meetings,” the researchers said.

“Meanwhile, the impact of the federal budget looks to have been very mixed.”

Sentiment has lifted slightly since the budget despite “few consumers expecting to benefit directly”.

Baby boomers and Gen-Xers’ sentiment dipped to extremely weak (an index score of below 70), while millennials are modestly pessimistic, with an index score of 95, and Gen Z are feeling “outright positive”.

“Sentiment generally declines with age, moving 1ppt lower every two years. However, the generational gap has widened materially in 2026,” the researchers said.

Asked about family finances versus a year ago and looking ahead 12 months, people are feeling rosier.

But polling on the economy in 12 months and in five years produced the two weakest scores since November 2022.

“Consumer job loss fears eased somewhat in May … consumers remain a little on edge about job prospects,” the researchers said.

“Housing-related sentiment is looking very unsettled, reflecting a mix of price declines in some major markets, actual and expected interest rate rises and some major tax policy changes affecting investor housing announced in the federal budget.”

The survey takes in responses from 1200 adults, weighted to reflect Australia’s true population distribution, and was done from May 11-15.