A global bank economist has labelled the revaluation of the Australian residential property market as non-dramatic as it has not been coupled with a drop in employment numbers.
“We’ve had strong jobs growth at the same time house prices have been falling and so we’ve had a very orderly correction in the housing market,” HSBC chief economist Paul Bloxham told delegates at the recent Australian Shareholders’ Association National Conference 2019 in Melbourne.
However, Bloxham added the residential property market correction was beginning to have an effect on other sectors of the economy.
“One of the things it’s doing is it’s slowing down the housing turnover, so there are fewer houses being bought and sold [because] people choose to sit still when house prices are falling, and the slowdown in turnover is in turn weighing on motor vehicle sales and sales of furniture,” he noted.
“[This is] because people tend to, when they renegotiate their mortgages, buy a new car and when they get a new place they tend to deck it out with new furniture, so we’ve seen a slowdown in consumer expenditure on those sorts of durable items.
“But we haven’t really seen a significant slowdown in consumer spending more broadly because the labour market has held up reasonably well.”
He warned there were signs now the unemployment rate is starting to rise and this would start impacting on monetary policy in the immediate term.
“The RBA (Reserve Bank of Australia), having had inflation now below target for a consistent period of time, is starting to determine it probably needs to do a little bit more to try and provide support for growth,” he said.
“So the market and ourselves are pricing and expecting that the RBA probably will cut its cash rate a bit further probably in June and then again in August.”
The RBA cut official interest rates by 0.25 percentage points to a record low of 1.25 per cent on 4 June.