Home buying intentions still near record highs despite pandemic, says CBA

author-avatar By on April 22, 2020
Home buying intentions still near record highs despite pandemic, says CBA

Photo by Mitchell Luo on Unsplash

Buyers are still pressing ahead with their search for a home despite the coronavirus pandemic, according to new data.

The latest Commonwealth Bank (CBA) Household Spending Intentions Series (HSI) data showed home buying intentions declined only marginally in March, but still remained near all-time record highs.

CBA Chief Economist Stephen Halmarick said low interest rates could be supporting buying intentions but pointed to a drop in turnover caused by the ban on auctions and open homes.

"The Reserve Bank of Australia's substantial monetary policy easing over March has seen mortgage interest rates fall and this would (under normal circumstances) be expected to support buying intentions," he said.

"Since March, however, turnover in the housing market has declined significantly as public open houses and public auctions were banned, as evidenced by the fall in auction clearance rates.

"Rising job insecurity is also a factor.”

Property values in the country's two largest markets are expected to be hardest hit by the pandemic and could fall by as much as 30%, which would spell opportunities for buyers.

Buying a home or looking to refinance? The table below features home loans with some of the lowest variable interest rates on the market for owner occupiers. 

Provider
Ad rate
p.a.
Comp rate*
p.a.
Monthly
repayments
 
Fixed 2 Years 70% LVR
2.19% 2.56% $1,517 Go to site
2.59% 2.55% $1,599 Go to site
Budget Home Loan OO P&I
2.68% 2.74% $1,618 Go to site

Base criteria of: a $400,000 loan amount, variable, principal and interest (P&I) home loans with an LVR (loan-to-value) ratio of at least 80%. If products listed have an LVR <80%, they will be clearly identified in the product name along with the specific LVR. The product and rate must be clearly published on the Product Provider’s web site. Introductory rate products were not considered for selection. Monthly repayments were calculated based on the selected products’ advertised rates, applied to a $400,000 loan with a 30-year loan term. Rates correct as at 03 August 2020. View disclaimer.

The spending habits of Australians in response to the pandemic could be clearly seen in the data.

"The Commonwealth Bank Household Spending Intentions (HSI) series, data to end March 2020, indicates a clear response to efforts to slow the spread of COVID-19," Mr Halmarick said.

Entertainment and travel spending intentions fell sharply in March as lockdown and travel restriction measures took hold. 

"The March Travel HSI readings are the lowest, by a large margin, since the series began," Mr Halmarick said.

"The ongoing shutdown of key sectors of the economy, the effective closing of the borders and the government directive to ‘stay at home’, could be expected to weigh on the Travel intentions HSI for a number of months."

In contrast, retail and health and fitness spending intentions both jumped significantly higher in March.

"The surge in spending in March was likely related to consumer’s response to the developing COVID-19 shutdown and a jump in spending on supermarket items, alcohol and household equipment and furnishings," Mr Halmarick said.

"The increase in the Health and Fitness HSI may be related to spending intentions on medical needs and the desire to create ‘home gyms’ and/or undertake ‘virtual’ personal training activities in the COVID-19 shutdown period."

Education spending intentions also ticked higher in March as online and virtual schooling came into effect.

There are some signs of a 'wealth effect' from the housing market supporting spending intentions for motor vehicles, according to the data.

"The HSI readings for motor vehicles showed a distinct turn up in spending intentions from late in 2019 – which then extended into early 2020," Mr Halmarick said.

"However, this improvement partly reversed in March as the COVID-19 shutdown made shopping for a new car or commercial vehicle challenging."

Car sales figures have been diving for the last two years but some experts believe the coronavirus crisis presents the "perfect storm" for buying a car.


Disclaimers

The entire market was not considered in selecting the above products. Rather, a cut-down portion of the market has been considered which includes retail products from at least the big four banks, the top 10 customer-owned institutions and Australia’s larger non-banks:

  • The big four banks are: ANZ, CBA, NAB and Westpac
  • The top 10 customer-owned Institutions are the ten largest mutual banks, credit unions and building societies in Australia, ranked by assets under management in November 2019. They are (in descending order): Credit Union Australia, Newcastle Permanent, Heritage Bank, Peoples’ Choice Credit Union, Teachers Mutual Bank, Greater Bank, IMB Bank, Beyond Bank, Bank Australia and P&N Bank.
  • The larger non-bank lenders are those who (in 2019) has more than $9 billion in Australian funded loans and advances. These groups are: Resimac, Pepper, Liberty and Firstmac.

Some providers' products may not be available in all states. To be considered, the product and rate must be clearly published on the product provider's web site.

In the interests of full disclosure, Savings.com.au and loans.com.au are part of the Firstmac Group. To read about how Savings.com.au manages potential conflicts of interest, along with how we get paid, please click through onto the web site links.

*The Comparison rate is based on a $150,000 loan over 25 years. Warning: this comparison rate is true only for this example and may not include all fees and charges. Different terms, fees or other loan amounts might result in a different comparison rate.

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author-avatar
Emma joined Savings.com.au as a Finance Journalist in 2019. She is a journalist with more than five years experience across print, broadcast and digital media, with previous stints at Style Magazines, 4ZZZ radio, and as editor of The Real Estate Conversation. She's most passionate about improving the financial literacy of young women and millennials by writing about complex financial topics in a way that's easy for the average Joe (or Jill) to understand. When she's not writing about finance she's watching Greys Anatomy (again).

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