Home buying intentions up almost 15% in May: CBA

The Commonwealth Bank of Australia’s (CBA) Household Spending Intentions (HSI) Index for May 2023 found that home buying spending intentions increased by 14.4 per cent in May after a fall of 13.8 per cent in April.

According to the HSI Index, there was a large lift in home loan applications during May and that seasonal factors “are at play in this category” due to the high number of April public holidays.

Furthermore, the report stated that there are also broader factors at play here, with home prices rising with strong demand among rental shortages. Additionally, new listing and stock on the market are also low, which has led to an “abnormal situation” where home prices are lifting as the Reserve Bank of Australia (RBA) continues to increase interest rates.

Home prices have risen for three consecutive months over March, April, and May. CBA senior economist Belinda Allen stated the major bank now “[expects] home prices to rise by 3 per cent in 2023 and 5 per cent in 2024”.

However, according to Westpac’s Consumer Sentiment Index for June, the combination of higher interest rates and dwelling prices has driven a sharp fall in home buyer sentiment.

The “time to buy a dwelling” index fell by 5.7 per cent to 72, which undid most of the 7.4 per cent increase in May, while continuing to hold “near historical lows”.

Westpac chief economist Bill Evans stated: “While these are not the weakest index reads on record, the 16th-month run since March is easily the most prolonged period of very weak buyer sentiment we have seen since the survey began in 1974.

“However, despite the unexpected increase in the cash rate, expectations for house prices remained firmly positive.

“Indeed, there was no significant change in the index in the samples before and after the rate increase decision was announced (146.2 and 147.1, respectively).”

CBA’s HSI Index for May rose by 3.1 per cent in original terms, pushed higher by a rise in spending intentions in health and fitness, home buying, transport, and motor vehicle spending intentions.

However, while Westpac’s Melbourne Institute of Consumer Sentiment index rose by 0.2 per cent from 79.0 in May to 79.2 in June, the index has held around levels not seen on a sustained basis since the deep recession of late 1980s/early 1990s.

CreditorWatch chief economist Anneke Thompson said: “Consumer confidence remains near recessionary levels, with consumers surveyed by Westpac after the rate rise decision on June 6 noticeably more pessimistic than those surveyed the day prior.

“Consumer sentiment has never been this low for this long, which points to difficult times ahead for the retail sector in Australia.

“Already, the household goods sector is being severely impacted, with trade in this sector down almost 5 per cent in the year to April 2023, despite record inflation over that time period.”

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