Money is failing to buy happiness in the states where home prices are booming, with homeowners considerably more pessimistic when compared to the rest of the nation.
Queensland, Western Australia (WA) and South Australia (SA) have recorded the largest breakdown in sentiment over January, the Westpac-Melbourne Institute's Index of House Price Expectations shows.
The index measures how homeowners feel about their family finances compared to 12 months ago, as well the short- and medium-term economic outlook, and the timing of spending decisions.
All sub-indexes recorded in January read below 100 for only the second time since October 2024. Pessimists also outnumbered optimists across every component.
The results for WA, Queensland and SA come despite the three states being the outliers for surging home price growth in the last year.
Home values increased by 17.2%, 13% and 11.7% across the states respectively in the 12 months to December 2025.
Westpac–Melbourne Institute Consumer Sentiment Index, January 2026. Picture: Westpac
The latest PropTrack Home Price Index confirms Perth was the strongest performing capital city of the last year, with home values up 17.2%, with Brisbane also up 14.6% and Adelaide up 12.8%.
Despite this, the consumer confidence index confirms the residents of the three states are “considerably more pessimistic” when it comes to how they feel about finances, particularly in the near future.
Homebuyer sentiment improved marginally this month across the board, but remains despondent overall.
“Consumers’ house price expectations continued to cool off a bit in January,” Westpac head of Australian macro-forecasting Matthew Hassan said.
“Over three-quarters of consumers expect prices to rise over the next 12 months.”
The house price expectations sub-index dipped 1.4% to 167.5 in January, down almost 3% from a peak of 172.4 in November; however, the index is up 25% on one year ago.
Since then, homeowners have felt the relief of three cash rate cuts from the Reserve Bank, bringing rates down to a four-year low of 3.60%.
The 'time to buy a dwelling' sub-index is also 89.6 - up 4% on a month ago, and 17.6 points ahead of January 2024 levels when the cash rate was 4.35%.
Despite this, interest rate uncertainty, unpredictable inflation, and a range of geopolitical pressures across the globe have made for an uneasy start to 2026.
Perth, WA. Picture: supplied
Queensland and WA recorded an index level of 80 for sentiment in January, while SA was 78. This is compared to a score of 97 in Australia’s most expensive state, New South Wales. Homeowners in Victoria also recorded a more positive 95.
“State measures show Queenslanders remain the most bullish (176),” Mr Hassan said. “The biggest cooling in expectations this month was in Western Australia (164) while consumers in South Australia are now the least bullish on the house price outlook (155).
“Australian consumers have entered the new year in a downbeat mood.”
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