Spooked buyers abandon Australia’s housing market

New data from the CBA shows that home buying intentions dived 21.5% in April to be 13.1% lower year-on-year, with accelerating declines expected now that interest rates are rising:

The home buying spending intentions index fell 21.5% in April… April is normally a seasonally weak month, but this month was weaker than average.

Home loan applications were weaker on the month in April. Google searches related to housing were also generally weaker across the different categories.

Relative to April 2021, Home buying intentions are lower at -13.1%/year and down 25% since the peak in March 2021.

Dwelling prices have continued to moderate and we would expect this to accelerate now the RBA has commenced its hiking cycle.

Australian home buying intentions

AMP chief economist, Shane Oliver, also believes that home buying intentions will crater as mortgage rates lift:

“I think the drop in home buyer demand has further to go as interest rates are just starting to rise at a time when affordability is already worsening”.

“The price falls will likely intensify as the pool of buyers dwindles as it gets harder for people to enter the market.”

Meanwhile, the PropTrack Housing Market Indicators Report was released yesterday and found that sales volumes in April were 15% lower year-on-year, driven by heavy falls across Sydney and Melbourne.

Enquiry volumes for all buyer types were also 22.4% lower compared to April 2021 and have almost halved from peak levels recorded last year.

Commenting on the results, PropTrack senior economist Eleanor Creagh noted that “price growth has slowed and stalled across the country particularly in Melbourne and Sydney”. Moreover, ” with interest rate rises, we are going to see borrowing capacity reduced and that will weigh on the housing market in the months ahead, with rising fixed mortgage rates and affordability constraints”.

Finally, Westpac’s “time to buy a dwelling” index, which was already 40% below its most recent peak in November 2020, fell a further 1.5% in May to it lowest level since April 2008.

With mortgage rates on the rise and house prices now expected to fall, home buyer demand should collapse. How far depends on whether the RBA takes a measured approach to rate rises, or hikes aggressively.

Unconventional Economist

Comments

  1. The Travelling PhantomMEMBER

    And also spooked sellers abandoned the market.
    As Peachy once said if it’s a stand off between sellers and buyers. Sellers win

    • A ponzi needs continuous inflation to sustain itself. Rising interest rates in response to supply side inflation is going to rapidly feed back into spending>employment>confidence>house prices. It’s a doom loop.

      • bubbah buddhaMEMBER

        Juat like a bushfire, when it gets big enough and the winds pick up, the choice isnt with ‘the guy who holds the hose mate’! I thought it was going to cat h fire in 2016 and again in 2020 but the undergrowth fuel load has been building for the mother of all marshmallow melters!

    • tmnsoonMEMBER

      Depends how long it goes on for. If this is a long term thing that drags for years, some sellers will eventually have to capitulate for various reasons. At least first home buyers can continue renting until the prices come down.

      • Statements like “sellers don’t need to sell” ignore the obvious – that vendors need to sell for all kinds of reasons, not least of which is wanting to move house – buying something and needing to sell into the same market.

        And death, that old chestnut. Happens to just under 1% of the population in any given year.

        Remember the same factors that drove house prices up beyond belief, will also drive them down beyond belief.

        All you need is more people selling than buying.

        • tmnsoonMEMBER

          Exactly. As boomers die off most of their generous real estate holdings will need to be liquidated so the cash can be divvied up amongst their kids. Others will be forced to sell as they can’t look after themselves anymore and need to go into a retirement village or old age home.

          • The spruikers think divorce is great for property markets as it creates new households. Maybe LNP can make this a cornerstone of their election policy – HomeSplitter – $20K grant for divorcees to buy another property after they split.

        • Sellers don’t need to sell works when rba is madly lowering the rates to protect sellers from having to sell.
          Good luck to that logic when bond market is in charge… iR rising.. this is different to all the other times

      • bubbah buddhaMEMBER

        When construction goes titsup, and subsequent dominoes of property de elopers and large construction firms hitting the wall , not paying subbies and them suffering and folding etc eyc all the way down to the bloke selling the coffee and rolls at smoko….who took out morgages and now have no income. Yes employment is sky high now, bit so was confidence in the rocketing property market 6 months ago in the middle of a pandemic…and thats not getting started on Revenue panicing from going coldturkey on 30 years of property junk in its veins, coming down hard on small to medium businesses and creating further carnage…..Taxmen, they eat their young for today. Seen it all before.
        You live and learn!

  2. We Lost the EthMEMBER

    Be interesting to see how it plays out with the mix of longer build times and higher costs. I know a few folks who have recently been told it will take 9-12 months longer than expected for their new build to finish who were sitting happily as prices rose and planned to sell when the new place was ready and only move once. Now rushing to get their current place on market and move in with parents for a year until the new home is ready.

    • darklydrawlMEMBER

      I would also propose that a few of those new build will never be completed as at least some of the builders will go into liquidation over the next 12 months. Not everyone, but almost certainly some consumers will be burnt badly.

  3. The bank of M&D may have difficulty with providing or guaranteeing loans due to reduced cash flow as their own mortgage costs rise and the book value of their home decreases. They’re more likely to invite their offspring to stay at home longer (at least it’s cheaper).

    • darklydrawlMEMBER

      I own US investment property. It is a much better ROI than anything you can get in Oz. Ok, that is perhaps misleading these days. Plenty of US property markets are now running hot, but 10 years ago it was a buyers market. You could pick up a 4 bedroom single family home on it’s own block in a decent state / city / location for between $35K to $75K. A similar place in Oz would set you back at least 10 times that amount. Those places are currently worth around $400 K USD. Rent is circa $1500 USD per month. HOA and taxes are only about $100 per month, lock stock. Not bad.

      The only downside is it’s a LOT of work to get in the market as a foreign national based in Oz. You usually need a significant deposit (circa 20%-40%), but that is not such a problem if the prices are much lower.

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