realestatebusiness logo

Subscribe to our newsletter

Stronger housing market extends “wealth effect”

The strong upward trend in home-buying intentions is translating into higher motor vehicle spending intentions, according to new CBA research.

The latest data from the Household Spending Intentions (HSI) Report released by the Commonwealth Bank of Australia (CBA) has shown that sustained and solid upward trend in home-buying intentions is leading to higher motor vehicle spending intentions for the second consecutive month.

According to research from the Reserve Bank of Australia, motor vehicle spending is the form of spending most sensitive to changes in consumer wealth.

The CBA report used its own spending data with Google Trends to provide a view on the changing spending behaviours of Australians and the potential implications for the economy.

The results highlighted that home-buying intentions eased back a little in January, but the strong upward trends remain intact.


Readings in the report remain at levels that indicate further gains in dwelling prices are in the offing, as well as a turn in the residential construction cycle and a positive wealth effect that should help consumer activity.

Buying intentions for motor vehicles have turned decisively higher, according to the report, albeit from a low base.

The improving trend is all the more significant because of RBA’s research, which has revealed spending patterns on motor vehicles are most sensitive to changes in wealth.

Commenting on the report, CBA chief economist Michael Blythe said trends in the remaining HIS measures are mixed but on the soft side overall, citing the Australian bushfires and coronavirus as having a potential negative impact.

“There are clear signs of a turndown in education-spending intentions and, especially, travel-spending intentions,” Mr Blythe said.

“These sectors have likely been impacted by the combination of the devastating summer bushfires in Australia and the policy response to the coronavirus. Retail, health and fitness, and entertainment-spending intentions all look to be tending sideways.”

“The drag from falling construction activity on consumer spending and the broader economy could be over by mid-year.”

Mr Blythe added, however, that a positive wealth effect that has led to stronger motor vehicle spending intentions could extend to other parts of consumer spending.

[Related: Buyer sentiment continues to rise]

Stronger housing market extends “wealth effect”
Stronger housing market extends wealth effect

Latest News

The tech company has appointed its first female chief executive to succeed Ian Hendey and continue its expansion plans. ...

The third-party channel is now responsible for more than half of Bendigo and Adelaide Bank’s loan book, new data shows. ...

The Mortgage Business Uncut podcast is your weekly analysis of the biggest themes shaping the Australian mortgages market. ...


Join Australia's most informed brokers

Do you know which lenders are providing brokers and their customers with the best service?

Use this monthly data to make informed decisions about which lenders to use. Simply contribute to the survey and we'll send you the results directly to your inbox - completely free!

Do you think the new NSW property tax will help or hinder first home buyers?

Website Notifications

Get notifications in real-time for staying up to date with content that matters to you.