New data has shown that Australian consumers’ home buying intentions rose in December, now sitting at a record high.
According to the latest Household Spending Intentions (HSI) report compiled by the Commonwealth Bank of Australia (CBA), the intention of Australian consumers to buy property rose to a record high in December.
The report suggested that the bump in home buying intentions is a likely indication that the drag from falling residential construction is coming to an end.
Further, the emerging uptick in other indexes of consumer spending intentions suggest that the “wealth effect” produced by increasing housing prices in the latter half of 2019 has supported an increase in desire to spend in other areas, including cars, travel and entertainment.
Buying intentions for purchasing motor vehicles improved slowly over the months leading to December, while spiking more dramatically during the holiday period.
However, retail spending intentions remained flat in December, as households continued to be cautious with their retail spend, which shows little signs of improvement.
CBA chief economist Michael Blythe anticipated that the increase in home buying sentiment would likely see dwelling prices continue to rise into the first half of 2020, while the residential construction downturn should also improve.
“The home buying intentions series lifted again and is now at a record high,” he said.
“There are some early signs of a ‘wealth effect’ from the housing market supporting spending on motor vehicles, albeit from a very low level, as well as travel and entertainment.
“Past cycles show that leading indicators like building approval turn about three months after home buying intentions start to lift.
“A bottoming in the construction cycle would remove a major growth drag on the economy, and also helps retailing.”
Mr Blythe also noted the significance of an uptick in spending on motor vehicles in December, as RBA research suggested that this purchase category is “most sensitive to changes in wealth”.
The results for retail spending intentions have been inconsistent, despite market stimulus, according to Mr Blythe.
“The flat trend in the retail HSI remains a disappointing outcome relative to the stimulus applied via interest rate cuts, tax rebates and the upturn in dwelling prices,” he said.
“The zig-zag pattern for the retail HSI indicates that the ‘Black Friday’ event brought forward spending from December into November without necessarily boosting spending overall.”