Consumer confidence has surged for the fourth consecutive month to reach its highest level since October 2010, but home buyers are second guessing whether it is the right time to jump into the market.

The Westpac-Melbourne Institute Consumer Sentiment Index rose 4.1 per cent in December, driven further by the news of a technical recession being over and better prospects for a vaccine.

Westpac chief economist Bill Evans said the pandemic-induced recession was clearly different to previous recessions and that consumer confidence was back to pre-COVID-19 levels.

“After only eight months the evidence seems clear that sentiment has fully recovered from the COVID recession,” Mr Evans said.

“The behaviour of the index highlights the difference between this recession, the downturn during the global financial crisis and the recession of the early 1990s. The recovery in sentiment in the COVID recession has been much more rapid.”

Of the five key sub-indices, four rose.

The only one that did not was the “time to buy a dwelling” index, which dipped back down from November’s seven-year high.

“This suggests the turnaround in Australia’s housing markets – which are all now seeing price gains – may be starting to shift views on affordability and prospects for bargain buys,” Mr Evans said.

“The index is usually a good gauge of buyer sentiment amongst owner occupiers, a group that is more sensitive to fluctuations in affordability.

“New lending data indicates that owner occupiers, including first home buyers, have been much more prominent in this recovery to date than investors, who typically respond to price expectations rather than affordability.”

Residential property prices nationwide rose for the second consecutive month in November, driven by record low interest rates.

The time to buy a home index is still 4.4 per cent above its long run average.

Westpac’s “time to buy a major household item” sub-index lifted 0.7 per cent to be up 5.9 per cent higher than this time last year.

“The surge in sales of household goods we saw earlier in the pandemic is now slowing, but activity remains well above pre pandemic levels,” Mr Evans said.

As restrictions ease, confident consumers are back spending.

Westpac’s sub-index that asks consumers about their views on the “economy over the next 12 months” rose 9.9 per cent to 111.9, a 10-year high.

“The near-term outlook would have been significantly boosted by the continued containment of the virus locally; the September quarter national accounts, which showed a stronger than expected initial rebound in the economy; and positive news around prospects for a vaccine,” Mr Evans said.

This story was originally published in the Australian Financial Review. Read the original story here.

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