While housing has been a positive tailwind for retail over the past two years, broker Macquarie Research now forecasts house prices to fall 7.5%, which could flow through to confidence and reduced consumer spending in housing-related retail segments. However, 2nds World owner, Peter Hammerman says the moderation in the housing market won’t slowdown appliance sales.
“I view real estate as a separate entity to the retail space. It is a matter of can I or can’t I afford this property? But when it comes to buying appliances, if your fridge or washing machine breaks down, you need a new one. With the wide choice in payment options, including interest-free periods, consumers are willing to buy new appliances, despite the housing market forecast,” Hammerman told Appliance Retailer.
“However, I do see that the house price fall may impact on the renovation market, which in turn may affect consumer spending on upgrading products, but I do not think it’s all doom and gloom for retailers.
“The cooking category represents over a quarter of our business, including replacement appliances, which I think has remained strong with the popular demand of cooking shows,” he added.
Home-buying conditions in Australia have deteriorated, with home buyer sentiment falling sharply in New South Wales, the country’s largest state, according to Credit Suisse. Macro-prudential tightening, out-of-cycle rate hikes on investor mortgages and weakness in Chinese buying are having a clear impact on sentiment and demand, Credit Suisse says.
Australia’s central bank and bank regulator will welcome a cooling in the housing market, but the Reserve Bank of Australia would not like to see a sharp fall in New South Wales housing demand, as surveys of buyer sentiment are suggesting. Falling housing demand would severely inhibit efforts to spur re-balancing of the economy away from mining, and create systemic risks, according to Credit Suisse.
A nine-year low in the pace of Australian population growth will lower Australia’s potential growth rate, and also slow the transition from mining to non-mining growth activity, Macquarie Research warns. Slower demand growth, particularly for housing, increases the reliance on a weaker currency and lower rates to deliver a sufficient upswing in domestic demand, it adds.
“The weaker population growth profile means some combination of a decline in house prices, a cut in interest rates; and a reduction in dwelling supply is likely to be needed to restore balance to the housing market,” it says.