Home buying intentions jump sharply: CBA

After reaching a new series high in March, the Commonwealth Bank of Australia’s (CBA) latest HSI series report showed that home buying intentions surged in April 201 relative to both April 2020 and April 2019 to over 80 per cent.

The improvement was driven by both higher home loan applications and Google searches in April 2021 as the national real estate market attracted prospective buyers, the major bank said.

CBA also said that it expects the home buying market to be a key source of support for the Australian economy in 2021, driven largely by the very low level of interest rates.

It expects residential house prices to rise by 14 per cent to the end of 2022, CBA said.

The Household Spending Intentions series combines CBA’s spending data with Google Trends’ publicly available search activity and connects actual spending data to intentional data to provide an indication of prospective spending trends across seven key sectors.

The series showed improvement across all seven categories amid signs that the economy has progressed in its recovery in April 2021, according to CBA chief economist Stephen Halmarick.

Car buying spending intentions continued to improve in April 2021, compared with April 2020 and 2019, driven by both actual spend and car loan spend, the bank said.

CBA also said that the changing use of public transport, supply shortages, and changing patterns of work have all been boosting motor vehicle spending intentions. It added that the ongoing improvement in the housing market is expected to support the outlook for motor vehicle spending as increased household wealth could translate into increased demand for new and used cars.

Spending intentions also increased across the retail, entertainment, education and travel sectors compared with April 2020, the data showed.

However, while retail spending was stronger this April compared with April 2020 and April 2019, travel spending intentions were lower than April 2019, reflecting the lasting impact of COVID-19 on this sector of the economy, CBA said.

Commenting on the latest spending intention series, Mr Halmarick said that the improvement across the sectors was not a surprise as “we know that April 2020 was the low point for spending as the first wave of COVID-19 restrictions hit Australians”.

“A year later, the economy has recovered strongly from COVID-19 impacts, with employment above pre-pandemic levels and household spending intentions on the rise as consumers once again feel confident about their economic prospects,” he said.

Mr Halmarick noted that the economic recovery was reflected in the federal government’s 2021-22 budget, which said that the underlying cash deficit in 2021-22 is forecast to be $106.6 billion (5.0 per cent of GDP).

This has been projected to improve over the forward estimates to a $57.0 billion deficit in 2024-25 (2.4 per cent of GDP) and to a deficit of 1.3 per cent of GDP by the end of the medium term, budget papers have shown.

Mr Halmarick also noted that the budget included targeted support programs that he said “aim to put more people into jobs and ensure the economic recovery is widespread”.

Home ownership measures that were announced ahead of the full budget release included a new Family Home Guarantee that aims to give 10,000 single parents with dependants the opportunity to build a new home or purchase an existing home with a deposit of as little as 2 per cent without having to pay lender’s mortgage insurance, and the extension of the First Home Loan Deposit Scheme (New Homes) for a second year with an additional 10,000 places being made available in 2021-22.

[Related: Home buying intentions spike in February]