Australian home prices find a floor in July, outlook improves
* Home prices across Australia's major cities rise
* First gain in nationwide home prices since October 2017
* Economists don't see a return of boom times yet
* Wage growth slows under new enterprise bargaining
(Rewrites throughout, adds economist comment)
By Swati Pandey and Wayne Cole
SYDNEY, Aug 1 (Reuters) - Australia's hard-hit property
markets of Sydney and Melbourne enjoyed a second straight month
of gains in an early sign that rate cuts were feeding through
although slow wage growth and record household debt means boom
times are still distant.
An end to the long downturn will be relief to the central
bank, which cut interest rates in June and July to a record low
Yet, despite Thursday's data showing home prices across
Australia's major cities rose 0.1% last month, economists are
not too hopeful of a solid turnaround.
"July officially marks the end of the longest and deepest
house price correction in Australian history," UBS economist
George Tharenou said in a note to clients.
"While prices and sentiment have clearly turned, we remain
cautious and do not expect a V-shaped recovery," Tharenou added.
"Importantly, given the only modest price gains we expect,
and still weak volumes, this recovery will likely not be a
material boost for consumption."
Record high household debt-to-income ratio together with
stricter bank lending rules and an increasing supply of new
apartment units are likely to keep the lid on home prices,
further easing pressure on construction activity.
As a result, AMP's Shane Oliver expects "constrained" low
single-digit price gains through 2020.
ANNUAL WAGE RISES
In a sign the property sector turmoil could extend, separate
data on Thursday pointed to a slowdown in annual wage rises in
new enterprise bargaining agreements (EBAs), with weakness seen
across public and private sector firms.
EBAs for the March quarter eased to 2.7% from 2.3% in the
period ended September 2018, government data showed.
"This suggests that the gradual improvement we have seen in
wages since 2017 may falter, particularly given the recent rise
in underutilisation, supporting the need for another rate cut in
2019," analysts at ANZ said.
June quarter wage price index data is due on Aug. 15 and
could point to a slowdown as the unemployment rate hovers at an
eight-month high of 5.2%.
Even so, the early signs of house-price revival were seen as
a mild positive for Australia's retail sector, which is reeling
from a protracted slowdown.
Housing stock is valued at A$6.6 trillion ($4.52 trillion),
or almost four times Australia's annual gross domestic product.
So, an end of the long property market downturn could be a
lifesaver for Australia's struggling economy, given how erosion
of housing wealth undermined consumer confidence and spending
"Sentiment based measures suggest volumes will pick up in
coming months," said Matthew Hassan, a senior economist at
Westpac. A Westpac consumer survey pointed to a likely recovery
in sales over the second half.
"Importantly, the next few weeks will also start to see some
seasonal shifts," Hassan added. "While spring doesn't officially
start until Sept. 1, auction markets typically see a lift in
clearance rates from around August."
But there is little cheer for real estate firms.
Australian construction firm Adelaide Brighton
downgraded earnings guidance this week amid a steep drop in
Residential developer Ralan Group called in administrators
this week, becoming the second major real estate company to
collapse over the past two months.
($1 = 1.4603 Australian dollars)
(Reporting by Wayne Cole and Swati Pandey; Editing by Sam
Holmes and Richard Borsuk)
First Published: 2019-08-01 02:00:00
Updated 2019-08-01 06:01:26
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