The Westpac-Melbourne Institute Index of Consumer Sentiment increased 2.6% in March, with the Index now just 0.2 points below the December level which was a 10-year high.

The main factors driving the index are improving economic prospects, Australia’s success in containing the virus, the promise of vaccines bringing an end to the pandemic and stimulatory government policies.

The “time to buy a dwelling” index slipped 3.6% – a fourth consecutive fall to be down 11.9% from the peak in November. “We have found this Index to be closely linked to affordability in the past,” the report says. “The decline suggests resurgent prices are already starting to curb buyer interest.”

On the other hand, the House Price Expectations Index increased 3.1% in March to a new seven-year high, 12.5% above its pre-pandemic level. The Index is a lead indicator of the confidence of investors, whose presence in the early stages of the housing boom has been overshadowed by owner-occupiers.

House price expectations are particularly buoyant in NSW, Queensland and WA.