Luxury car sales lift with house prices

CoreLogic’s September housing market chart pack shows that the rebound in dwelling values nationally has been driven overwhelmingly by the premium end of the market:

This rebound in premium property values caused luxury car sales to rise for the second month in a row in August, while sales for the year to August increased by 0.6%. However, over the same period, sales of standard cars fell by 10.1% in August.

From The AFR:

“Historically it has been a very good relationship – sometimes it leads house prices, sometimes it lags them,” Commsec chief economist Craig James said.

“When luxury vehicle sales are in retreat you can bet that home prices aren’t far behind. That has been the case since the early 1990s”…

“I think this [car sales data] means we have probably hit the bottom now in terms of the economy,” Mr James said. “I don’t think we will see another boom in house prices but with the election uncertainty behind us and the interest rate and tax cuts, I think the worst is behind us.”

Car sales have historically been influenced heavily by the ‘wealth effect’. So, the bounce in house prices points to rising car sales.

That said, there are stiff headwinds facing the economy, most notably: the dwelling construction bust, the peaking in infrastructure investment, and the reversal of commodity prices.

Therefore, Craig James has gotten way ahead of himself.

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