The Commonwealth Bank of Australia’s (CBA) latest Household Indicators Spending Intentions Series (HIS) has revealed that home buying intentions stabilised in May, with the HIS recovering to just under -30, after plunging by 40 index points over the past few months, reflecting the economic shock from the COVID-19 crisis.
According to CBA’s chief economist, Stephen Halmarick, the recovery was driven by an increase in mortgage applications in response to the record-low interest rate environment.
“This was especially the case for owner-occupiers looking to lock in low fixed rate mortgages,” he said.
“Online Google searches related to home buying decreased in previous months and is in line with house price falls for the month.”
The latest auction figures from property research group CoreLogic also indicate that sales activity has lifted over the first few weeks of June, with both auction volumes and clearance rates rising in the week ending 15 June.
However, analysts are forecasting a prolonged downturn in the residential property market, with COVID-induced job losses threatening demand for housing and credit quality.
Subdued demand is expected to trigger further reductions in home values, which according to AMP Capital chief economist Shane Oliver could fall by 5 to 10 per cent throughout 2020 and into 2021.
Retail spending spikes
CBA’s research also revealed that the easing of social distancing restrictions has sparked sharp improvements across other sectors of the economy.
“We are seeing some big changes taking place in household spending that provide early signs of stabilisation and recovery in some parts of the Australian economy, largely driven by changes in government policy,” Mr Halmarick added.
“Data up to the end of May 2020 showed retail spending intentions jumped higher on the month, consistent with our CBA credit and debit card spending data.
“Improvement was also seen in entertainment spending intentions.”
Mr Halmarick said the key drivers of retail spending in May were food, general retail and household furnishings and equipment. However, the economist noted that a larger proportion of retail sales were likely flowing through credit and debit card spending, rather than by cash.
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