Australia’s housing bubble has delivered Harvey Norman a bumper 30.7% jump in first half profit. From The Canberra Times:
Sales across Harvey Norman franchise stores rose $193.8 million to $2.72 billion for the six months ended December 31, with sales of lifestyle and homemaker goods boosted by buoyant new home construction and strong house prices in Australia…
“Solid activity in the housing sector, higher home prices, lower unemployment and low interest rates are all supportive of continuing housing development and dwelling and retail spending,” the company said.
“Strong employment growth and households’ confidence have fuelled household consumption growth. The homemaker categories, namely furniture, bedding, whitegoods, small appliances and cooking, have dominated retail trends and Harvey Norman franchisees, being well-positioned, have been strong beneficiaries of these trends.”
Gerry Harvey should enjoy the conditions while he can. With household debt and house prices at their highest ever levels against incomes, wages growth going backwards in real terms, and the lowest rental growth on record, the housing/debt-fuelled consumption splurge cannot last.
Dwelling approvals also peaked in April 2015, meaning that construction will likely begin to fall in the second half. Indeed, the Housing Industry Association has forecast that dwelling starts will decline by 24.8% to 160,100 in 2017/18 (see next chart).
Might be time to take profits.
