What does it all mean?

- New home sales have soared over the past three months under the influence of the HomeBuilder Scheme. Used vehicle prices have soared in response to higher demand and lower stock levels. And home prices continue to hold up, supported by bank lending and low interest rates.

Up to May, Sydney and Melbourne home prices led the way higher alongside Hobart. Now Sydney and Melbourne prices are correcting and it’s the turn of Brisbane and Adelaide to drive national home prices higher. While the jobless rate has risen, interest rates are at generational lows and banks continue to lend,

What do the reports and figures show?

New Home Sales

According to the Housing Industry Association private house sales rose 3.6 per cent in August. Sales for the three months to August were up 36.5 per cent on a year ago.

The HIA report:

·        “New home sales for the six months to August 2020 were 8.7 per cent higher than in the same period the year before.

·        New Home Sales in Western Australia were 91.1 per cent higher in the past six months than in the same period last year and 4.2 per cent higher in Queensland for the same period of time.

·        New Home sales were static or lower for the past six months in Victoria, New South Sales, and South Australia as the pickup in sales due to HomeBuilder have not offset the losses due to the COVID recession.

·        Sales in WA at this time in 2019 were at record low levels following the bottom of the mining investment cycle, a situation that was exacerbated by the credit squeeze in 2018.

·        The combined impact of HomeBuilder, the WA State Government’s Building Bonus and pent-up demand for housing will see home building pull the WA economy forward. The surge in home building work from as early as the December quarter will see more skilled workers return to WA pursuing employment opportunities which will also underpin demand for this new housing stock.”

CoreLogic Daily home value index

In the first 16 days of September, home prices in the five mainland states were down 0.2 per cent compared with the end of August.

Prices were mixed across the cities: Sydney (-0.3 per cent); Melbourne (-0.5 per cent); Brisbane and Adelaide (both up 0.3 per cent); Perth (up 0.1 per cent).

What is the importance of the economic data?

The Housing Industry Association compiles a New Home Sales report each month. The data provides insights into the home construction sector.

CoreLogic maintains a daily index of home values that provides insights into consumer spending and the state of the established housing market.

What are the implications for investors?

Investors have a raft of relatively new indicators to watch to get a sense of how individual sectors and companies are faring, as well as the broader economy.

The Reserve Bank, governments and both regional and major banks are playing key roles in supporting economic recovery. However, there is still some way to go.

CRAIG JAMES is the Chief Economist at CommSec