― Survey responses around housing shaped as a particularly important aspect of the Aug survey. The ‘time to buy a dwelling’ sub-index fell heavily in Jul (–15.4%), pointing to a potential break-out from the 105-120 range that had prevailed since early 2014. The Aug update showed a decent 8.2% rebound but at 102.6 the index continues to show a material weakening in buyer sentiment.
― Market-wide data to May already has national turnover trending lower at a 2-4% annual pace. The Jul-Aug readings on buyer sentiment suggests falls will accelerate to a 10%+ annual pace by year end.
― Note that the ‘time to buy a dwelling’ index is typically seen as a gauge of buyer sentiment for owner occupiers rather than investors. The latter has been the driving force for housing market growth since mid-2014.
― The soft picture on buyer sentiment and turnover stands in stark contrast to very strong auction activity. Indeed clearance rates in 2015 have on average been 8ppts higher than in 2014. While not unprecedented, such a large divergence between turnover and auction results is unusual. Note that auctions only cover about 10-15% of total sales and are heavily skewed to the Sydney and Melbourne markets.
― The Westpac-Melbourne Institute Consumer House Price Expectations Index fell 5.6% in Aug to 137.7, from 145.8 in Jul. The Index is down 10.3% from its highs a year ago but still well above its long run average of 126.
― Dwelling price growth has picked up again in recent months. Our composite based on all available measures shows annual growth in dwelling prices at just under 10% nationally in Aug, with gains tracking an 11-12% annual pace over the last 6mths. Performances continue to vary enormously with growth in the high teens in Sydney, but prices fl at in Brisbane and slipping lower in Perth.
― Not surprisingly, consumers in NSW are more bullish on house prices than their peers in Vic and Qld. Consumers in WA have turned outright bearish on prices with those expecting further falls (45%) now heavily outweighing those expecting prices to rise (24.5%).
― Digging further into the detail, the degree of price optimism looks restrained in NSW and Vic. Although the proportion of consumers in these states expecting 10%+ growth has lifted in 2015, it remains well below the 25-30% reads in 2010. Meanwhile the degree of price pessimism in WA is very high with the proportion expecting price declines well above GFC peaks.
All signs point to softening house prices, except auctions clearances. It will be fascinating to see for how long specufestors and foreign criminals can resists the broader psychology of Australians.
David Llewellyn-Smith is Chief Strategist at the MB Fund and MB Super. David is the founding publisher and editor of MacroBusiness and was the founding publisher and global economy editor of The Diplomat, the Asia Pacific's leading geo-politics and economics portal.
He is also a former gold trader and economic commentator at The Sydney Morning Herald, The Age, the ABC and Business Spectator. He is the co-author of The Great Crash of 2008 with Ross Garnaut and was the editor of the second Garnaut Climate Change Review.
