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Australia's home-buying intentions reached their highest level in March, according to the latest Commonwealth Bank Household Spending Intentions (HSI) series.
The HSI study showed that home-buying intentions have increased in March to a new series-high, extending the previous improvement recorded in recent months. This growth was reflected in the increase in mortgage applications and Google Searches.
Stephen Halmarick, chief economist at CBA, said residential property prices in Australia are expected to grow by 8% this year and by 6% in 2022. House prices, in particular, are poised to increase by 9% this year.
"We continue to expect the home buying market to be a key source of support for the Australian economy in 2021 – driven largely by the very low level of interest rates," said Stephen Halmarick, chief economist at CBA.
Other spending categories also increased in March, with travel spending intentions posting the strongest year-on-year improvement. The stronger showing in the category was partly due to the collapse in spending recorded in March last year.
"The travel sector was among the hardest hit by the onset of the COVID pandemic, with border closures and a country-wide lockdown stifling nearly all travel-related activity. This month’s data, while distorted by base-effects, still demonstrates how far the sector has recovered since last year," Halmarick said.
Retail spending remained on the downtrend. The retail sector had been a standout during the same time last year, as actual spending and spending intensions surged during the early stages of the pandemic.
"Retail sales were the outperformer last year as everybody rushed to the shops to buy their canned goods and toilet paper, so the comparisons to last year underplay the strength of the sector and the continued economic rebound,” Halmarick said.
Despite the slump in retail spending intentions, Halmarick said that the overall improvement in the spending sentiment of Australians will help contribute to the economy, which is expected to achieve a 4.7% GDP growth this year.
“The stronger Household Spending Intentions report is another signal that Australia’s economic recovery is ongoing,” he said.
