After a measly two-year downturn, homebuyers now appear to be back in a big way. The proportion of Australians planning on purchasing a house is back near all-time highs, propelled on by three rate cuts according to the latest Commonwealth Bank research.
“The one area where monetary policy stimulus is clearly working is the housing market,” CBA chief economist Michael Blythe said in a note issued to Business Insider Australia. “Home buying intentions rose further in October and are now close to the record highs seen in [the first half of] 2017.”
The “sharp uptrend”, recorded in CBA’s Household Spending Intentions read, is in stark contrast to the reluctance of most Australians to spend money on anything else.
Aussies want to buy a house more than anything else (CBA).
The chart on the left indicates homebuyer sentiment, sharply rising in the last few months.It demonstrates its close relationship with house prices, having risen rapidly together as buyers return to the market.
While CBA credits the Reserve Bank of Australia’s (RBA) rate cuts for buoying the market, they have done far less for consumer sentiment more generally, with the chart on the right showing only a small uptick.
What is evident in CBA’s research is that RBA governor Philip Lowe’s long-promised “gentle turning point” in the Australian economy may be finally manifesting, according to Blythe.
“That said, that turning point looks pretty modest when benchmarked again record-low mortgage rates, the wealth boost from rising house prices, solid jobs growth and tax rebates. The “discrepancy” reflects one of the risks we have warned about for a while now. That is, interest rate cuts are no longer delivering much in the way of a boost to disposable income,” he said.
“And, by fuelling fears about the economic outlook, rate cuts are probably blunting some of the potential boosts from tax rebates and rising house prices.”
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