Trade war could derail housing recovery: REA

PHOTO: REA Group’s chief economist, Nerida Conisbee

No amount of interest rate cuts could offset downside pressures that emerge as a result of a trade war-induced recession, according to REA Group’s chief economist.

Green shoots are beginning to emerge in the housing market, with growing signs of a recovery following a prolonged period of subdued activity, which saw national home values fall 8.3 per cent peak-to-trough and mortgage approvals fall by over 20 per cent in the year to May 2019.

The latest data from property research group CoreLogic revealed that national home values increased 0.8 per cent in August – the first monthly increase since the downturn commenced – while the latest Lending to Households and Businesses data from the Australian Bureau of Statistics revealed that the value of home loan approvals increased by 5.1 per cent (seasonally adjusted terms) in July – the largest monthly increase since March 2015.

The improvement has been attributed to a range of positive market developments over the past few months, which include public policy certainty off the back of the federal election, the Reserve Bank of Australia’s back-to-back reductions in June and July, as well as recent changes to mortgage lending guidance.