Via the excellent George Tharenou at UBS:
Mar home prices 0.7% m/m, 7.5% y/y; but set to fall ahead – depends on policy
CoreLogic dwelling prices still rose another 0.7% m/m in Mar-20 (UBS: 0.8%, mkt: nf), moderating from a booming 1.1% in Feb-20. The y/y rebounded further to 7.5%, the fastest since Sep-17 (after 6.0%). Prices are up by 8.3% since the bottom in June. Strength is still led by Sydney (1.1% m/m, 13.0% y/y) and Melbourne (0.5%, 11.9% y/y). Meanwhile, the number of home sales (12-month sum) lifted a (modelled) ~10% y/y, the strongest since 2014. However, looking forward we expect existing home sales volumes will collapse – likely more than halving near-term – as long as the ban on auctions & open home inspections remains (which seems likely to persist for months). We also revise our forecast for home prices to start falling, given the hit to demand from the looming sharp recession and spike in unemployment. The extent and duration of prices falls is very uncertain, but lenders offering deferred mortgage repayments (for six months) is critical in helping to minimise ‘forced selling’. Furthermore, if price falls do become very significant, & potentially a macro-stability risk, we would expect further material Government support. The potential policy options include expanding/ extending the First Home Buyer Scheme to help overcome the ‘deposit gap’, cash payments for home purchases (i.e. the First Home Owners Grant, albeit we think it should be for new homes only), temporary reductions in State Government charges, especially stamp duty and land tax; or support to create a build-to-rent industry. The need for support is evident by the collapse in ANZ/Roy-Morgan consumer confidence of ~40% in the last month (to March 23) to a record low (since data started in 1973).Feb resi approvals +20% to 188k; but could be ~100k-120k in coming months
Residential building approvals in Feb-20 rebounded by 19.9% m/m (UBS: 10%, mkt: 4%, -5.8% y/y), to 188k, the highest level in a year (albeit after -15.1% to 157k). The m/m was driven by volatile ‘other’/multi’s (+61.7% after -35.2%); but houses were ~flat (-0.8% after +0.4%). Looking forward there is huge uncertainty from COVID-19, but we now see a sharp decline of approvals in coming months perhaps to ~100k-120k (reflecting weak demand & processing delays), the worst in >40 years; but a lesser decline in commencements to 140k in 2020 (was 170k), before recovering somewhat to 170k in 2021 (was 190k). Meanwhile, renovations (alterations & additions) retraced (-7.7% m/m, -5.9% y/y), but should be less negatively impacted ahead as ‘stood down’ workers turn to ‘DIY’ jobs. Elsewhere, non-residential building approvals also slowed (-6.1% m/m, 14.4% y/y); & likely to decline sharply ahead as projects get put on hold.
