Home-buying spending tumbles by more than 21% in April
Affordability concerns and the fear of more interest rate hikes mean fewer people are planning to enter the housing market, according to new data from Commonwealth Bank.
Home-buying spending fell by 21.5% last month after gains in February and March, and is 13.1% lower than in April 2021, according to CBA.
The CommBank Household Spending Intentions Index fell by 3.8% to 112.3 last month after hitting a record high in March, The Australian reported. The drop was driven by falls in home buying, health and fitness, and transport spending.
However, spending on the travel, entertainment and retail sectors was up.
The news comes on the heels of last week’s announcement by the Reserve Bank that the cash rate would rise by 0.25%, with a warning that more rises were on the way.
“We expect a fairly shallow hiking cycle, with further interest rate hikes in June, July, August and November 2022, and one final hike in February 2023, taking the cash rate to 1.60,” CBA senior economist Belinda Allen told The Australian.
Health and fitness spending fell by 14%, but was still up 2.9% from the same period last year. Transport spending dropped by 8.6%, driven largely by the drop in the petrol excise and lower fuel costs, but remains 13.5% higher than last year.
Travel spending posted a record high last month, up 10.6% month over month and 41% year over year, The Australian reported. Spending rose for travel agents, airlines, cruise ships, tourist attractions and accommodation. There was a drop in camper and RV rentals, indicating a change in travel plans as borders reopened.
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Entertainment spending rose by 6% in April, but remains 1.8% lower than the same time last year. Retail spending rose by 0.3%.
Allen told The Australian that the nation’s economy was in a strong position overall.
“We are seeing a post-COVID normalisation of consumer spending patterns, with lower spending on categories that increased during lockdowns, like health and fitness, while higher travel and entertainment spending reflects more people being out and about,” she said. “Going forward, it will be important to watch discretionary spending categories like home buying, motor vehicles, retail and entertainment to judge the impact of interest rate rises.”
Allen said that households had accrued a “very high level of savings” during the COVID-19 crisis.
“The labour market remains tight and wages growth is accelerating,” she told The Australian. “These factors will assist families with higher mortgage repayments over coming months.”
