- Australian home lending contracted by 4.8% in April, its largest monthly fall since 2015, after home inspections and auctions were temporarily prohibited.
- The drop was followed by car lending falling by 37.8% and personal loans by more than 17% as confidence sunk during the pandemic.
- However, a Westpac consumer survey released on Wednesday shows confidence is returning to pre-COVID-19 levels – suggesting Australians may believe the worst is over.
- The Commonwealth Bank has revised its forecasts, believing its forecast of 10% price falls may not come to pass after all.
Australia’s great love affair with the housing market appears to have cooled off somewhat, but the break may only have been temporary.
New home loans fell by 4.8% in April, marking the biggest monthly contraction since 2015, according to new ABS data.
While the fall was expected given the temporary prohibition on open houses and auctions, it underlines how much the market has so far encountered a temporary hiatus rather than a price meltdown.
“We had expected dwelling prices to fall around 7% over 2020 [or] 10% peak to trough [but] we now see the risks tilted towards a smaller fall,” CBA senior economist Kristina Clifton said in a note issued to Business Insider Australia.
“The coronavirus restrictions are being lifted faster than we first thought. Monetary and fiscal stimulus has been huge and is providing much-needed support to the economy.”
It comes just one day after Treasury revealed it too had upgraded its own forecasts, expecting unemployment to peak at 8% rather than 10% this year.
The fall in home lending was followed by an even sharper fall in other forms of credit, with personal loans down 17% in April and more than 25% for the year. Car loans, a leading indicator of consumer confidence, were down 37.8%, according to the ABS.
“This isn’t surprising with consumers tending to put off purchases of big ticket items like cars when uncertainty around the economic outlook is high,” Clifton said. “There was also a massive 594,000 fall in the number of jobs in April meaning that many consumers wouldn’t have been able to borrow.”
Just as dwindling consumer confidence and an uncertain outlook led lending lower however, a resurgence could soon see those same indicators recover ground.
The Westpac Consumer survey on Wednesday saw confidence climb for the second month in a row, returning it close to (albeit weak) pre-COVID-19 levels.
“Job security fears eased for the second month in a row and are well off the recent peak reached in April. An easing in restrictions and the relatively low number of coronavirus cases in Australia is making people feel more confident in the jobs market,” Clifton said.
“The JobKeeper and JobSeeker payments are also no doubt helping to mitigate job security fears.”
This is not to say things will simply be restored to normal right away. While confidence is returning, Australians appear to be more risk-averse than they were prior to the pandemic, according to the Westpac survey.
Likewise, hundreds of thousands more Australians remain out of work while the government is set to review its enhanced social security net later this month, potentially rolling the JobKeeper program back.
If it were to do so prematurely, May and June could end up being the eye of the storm.