Nila Sweeney | 21 July 2020
Home-buying intentions spiked in June as pandemic restrictions eased, returning close to levels seen in March when Sydney and Melbourne house prices were growing by 13 % and 12% respectively.
The Commonwealth Bank’s latest household spending intentions index showed a 6% rise in home-buying intentions over the month after collapsing in the early part of COVID-19 restrictions.
The index rose to near record high levels in March, before home-buying intentions tumbled in April as the economic shutdown restrictions dramatically affected home-buying activity.
CBA’s chief economist, Stephen Halmarick, said the recovery in June was fuelled by record low interest rates and the partial reopening of the Australian economy.
“We saw a large rise in new mortgage applications at CBA as people look to take advantage of the record low interest rates,” Mr Halmarick said.
“This tells me that low rates have the desired effect of getting people to borrow money and into the housing market, which is a good thing.
“While the more recent increase in COVID-19 cases in Victoria and the subsequent reintroduction of lockdown measures is a concern, the data for June shows solid recovery in spending intentions for home buying.”
Homeloanexperts.com.au mortgage broker Alan Hemmings said mortgage inquiries from home buyers had been surging since mid-May.
What the June number tells us is that people who are still employed are willing to take advantage of these very low interest rates and are getting into the housing market.— Alan Hemmings, mortgage broker
“We have seen a near 100% increase in overall inquiries over the past two months, with an even higher spike when HomeBuilder was announced in early June,” Mr Hemmings said.
“Over the last four weeks alone, we recorded a near-threefold increase in first home buyer inquiries compared to April 2020.”
Despite the rebound in home-buying sentiment, Mr Halmarick said price growth was unlikely amid the ongoing border closures.
“We do think house prices will fall over the course of the next six months, mainly because of the reduction in population growth with the borders closed,” he said.
“But I think what the June number tells us is that people who are still employed are willing to take advantage of these very low interest rates and are getting into the housing market.”
CBA has forecast a 10% drop in house prices in April due to the pandemic, but recently noted that the significantly lower mortgage rates were largely offsetting the other forces weighing on dwelling prices.
Nevertheless, the bank has kept its forecast, highlighting “it is still early days”.