September: Consumer Confidence Returns, Benefiting Property Market

From the abysmal confidence levels following the impact of Covid19 in April, September has blasted back by increasing 18.2% making property investors much more comfortable getting their foot on the property ladder. So much so, new home load applications have grown 11.8% – which is reflective of pre-pandemic levels.

Consumer Confidence

The Westpac-Melbourne Institute index of consumer sentiment shows only a 1.6% decline in confidence when compared with the six months prior; pre-COVID. The larger dip in August was a direct result of the stage 4 lockdown restrictions seen in Melbourne; however, a strengthening sentiment among Australians show some key drivers in the sub-indices:

  • Household financial situation currently vs. one year ago were up 3.7%
  • The expected household financial situation for the coming year was up 4.5%
  • Anticipated economic conditions over the coming year are below at 18% when compared to September 2019
  • Anticipated economic conditions over the next five years are up 2% when compared to September 2019
  • Buying conditions for major household items did rise when compared to last month, but down when compared to September 2019


source: tradingeconomics.com

Further Government Initiatives

The Reserve bank of Australia increased its Term Funding Facilities by $57 billion, allowing financial institutions to secure the .25% rate fixed for the next 3 years, which for the consumer means further retail interest rate cuts are on the horizon.

Bill Evans, Chief Economist at Westpac advised that the Australian Government will need more initiatives to expand monetary policy moving forward. This includes tax cuts, additional one-off payments to low-income earners, relieving investment restrictions, and a more aggressive infrastructure roll-out.

 

Increased Mortgage Applications  

Excluding refinancing applications, new mortgages increased by over 10% from June to September at over $14 billion. This is the biggest surge in finance loans since climbing out of the GFC of 2009, which is relative to the Consumer Confidence Index from the Westpac-Melbourne Institute.

HIA Chief Economist alludes to the pick up in the market will be good for builders and developers with stock for sale, however, customer demand may not be met with simply not enough house and land available.

If a large undersupply happens, prices will rise and any first home buyers or investors may get pushed back out of a ready to purchase position, rendering a portion of the government stimulus redundant.

Disclaimer: Different dwelling types in different regions behave in different ways therefore is advisable to consult an investment specialist if you are wanting to act on the current market opportunity.

Sources

https://forextv.com/forex-analysis/australia-consumer-confidence-surges-in-september/

https://www.afr.com/property/residential/new-home-loans-jump-the-most-in-11-years-20200909-p55tur

https://kalkinemedia.com/news/economy/westpac-mi-consumer-sentiment-index-rebounds-18-in-september