Since 2016, our structurally bearish thesis on Australian housing has taken a while to play out as cyclical data often managed to hold up as the RBA kept policy loose and as the global economy was awash with liquidity. Now, however, as global-liquidity headwinds are building, Australian housing data is as bad as we have seen it over the past two-and-a-half years.
Auction clearance rates have collapsed (top-left chart), with Sydney and Melbourne seeing less than 50% clearance, which was last seen during the 2008/2009 global recession. Building permits growth and housing finance have also both turned negative. It is rare for both to contract at the same time, and shows a lack of risk appetite from homebuilders while buyers are facing borrowing constraints. We can also see that speculative investor-driven demand has peaked and declined over the past 2 years (bottom-left chart), as investor housing-finance commitments have fallen nearly 33% from their 2015 peak. Finally, the last chart shows that credit conditions are not about to ease any time soon. The widening of the AUD analogue of LIBOR-OIS will lead to rising funding costs for Australian banks, and raise the cost of borrowing for home buyers.
(Click on image to enlarge.)
Source: Bloomberg, Macrobond and Variant Perception