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Investment in property sentiment hits 44-year low

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Confidence in investing in Australian real estate has dropped to its lowest in 44 years, according to the Westpac-Melbourne Institute consumer sentiment report for September.

Only 10.5% of Aussies surveyed said they feel property is a wise place to put savings – the lowest percentage since 1973.

At the peak in the mid-1990s, almost 50% of Australians felt that property was the way to go.

Almost a third (29%) of respondents chose “Banks” as the wisest place for savings.

It is thought that the cooling market combined with rising household costs and stagnant wages growth is to blame for the 44-year slump.

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Looking at consumer sentiment, September saw a slight increase (+2.5%) to a four-month high of 97.9. The consumer confidence index is down 4.4% year-on-year and anything below 100 denotes pessimism.

Meanwhile, the Reserve Banks is keeping rates fixed at the record low of 1.5% and there is no sign of that changing anytime soon.

“While those commentators favouring rate hikes next year point to record business conditions we are starting to see a considerable gap open up between business conditions and business confidence,” Westpac chief economist Bill Evans said. “Persistent weak consumer sentiment, consistent with weak consumer demand, may be worrying businesses around the sustainability of current strong conditions.”

Commsec also sees no need to hike interest rates and observed how Aussies are going off real estate investments.

“Putting money in the bank or paying down debt are still regarded the wisest places for new savings. And shares have narrowed the gap with real estate,” CommSec chief economist Craig James said. “A less frothy real estate sector would be very much embraced by the Reserve Bank.”

Paying down debt is no doubt weighing on the minds of many Australians. At the end of 2016, Australia had the fourth-highest national debt-to-income ratio (190%) according to OCED data.