Australia's property and loan markets show no signs of slowing, even as underlying inflation lingers.
Commonwealth Bank's (CBA)'s latest CommBank Household Spending Insights Index shows that household spending jumped 0.6% in October, notching up a 13th straight month of growth.
CBA's Head of Australian Economics Belinda Allen called the recent resilience among Australian households "remarkable."
But it's also a striking result, especially given the recent spike in the quarterly consumer price index (CPI). Australia's CPI rose 1.3% in the three months leading up to September, compared with June's quarterly reading of an increase of 0.7%. For the year leading up to September, the CPI climbed to 3.2%, up from 2.1% in June.
Meanwhile, the trimmed mean annual inflation — which measures underlying inflation by stripping out goods with volatile prices changes and what many consider a better indicator of inflationary pressures — rose to 3% in September, up from 2.7% during the June reading.
Both figures fell outside of the Reserve Bank of Australia's (RBA) target inflation range of 2% to 3%. As expected, the central bank held rates steady at 3.6% during its November meeting on monetary policy.
Allen said "sustained inflationary pressure could impact consumer choices going forward."
But brokers are noting that the market has been busier than ever.
Cara Julian, founder, director and mortgage broker of Melbourne-based Brava Finance, said there's "definitely" been more movement in the market in recent months, even as the upcoming holiday season approaches.
"Normally this time of year, pre-approvals would drop off, because people only have 90 days to use them," the broker explained to Australian Broker. "So December, January, it would drop off.
"But because I have a lot of customers who are first-time homebuyers, people just want to get in, or think they need to get in before the cost of housing increases too much as a result of the 5% housing scheme and the fact that there's such short supply," Julian continued. "People see a sense of urgency to get in and get themselves property before it becomes way too unaffordable from a house purchase price. People are really worried about that, probably more than anything else.
"And there's already been a lot of movement and the prices of houses keep going upwards," she said. "Each time one of my customers goes to an auction or an open house, there's more and more people there competing."
Julian added that if it wasn't for the Labor Party's updated housing scheme, people would probably be more cautious and holding off.
In October, Prime Minister Anthony Albanese's government expanded the Home Guarantee Scheme, commonly referred to as the 5% deposit scheme. Under the national government plan, eligible first-home buyers can purchase a home with as little as a 5% deposit, regardless of income. In addition, in the updated scheme, property price thresholds were amended to reflect market conditions.
The updated scheme is welcome news for aspiring homeowners who have struggled to get a foot on the property ladder. But it also adds pressure to an already strained housing market.
The Labor Party has previously pledged to build 1.2 million new dwellings nationwide by 2029. But annual building completions remain well below the pace needed to reach that goal.
Either way, the lack of housing, coupled with the new government schemes, are major drivers for the market's continued momentum, even as inflation rises and the RBA holds rates steady.
"And it is so concerning as a broker," Julian said. "There's two parts. First, as a broker, it's great to see customers, first-time buyers get into the market. However, on the other hand, it's really concerning because there's just not enough being done by the government to deal with this housing shortage issue. I know it's not something that can be solved overnight. But I just don’t see anything from the government coming through that really is going to have an impact."
Current market dynamics can be tricky for brokers navigating sustained demand amid a supply shortage. But Julian said there are things brokers can do to prepare.
"Having a pre-approval helps so much," she said. "It gives the customers more confidence. And going in with that pre-approval, a real estate agent is going to take an offer more seriously from a customer who has that pre approval.
"But also, I work with my customers on budgeting," Julian continued. "So they're not going in with the emotional potential of finding a property and then spending way more than they actually can. So we really have a look at their budget and work out — even though the bank may say they can afford it — we look at, can they actually afford it? And then we'll set a really strict budget for them to work through to make sure that they're not going to have financial pressure.
"And that includes, looking at what happens if the interest rate does increase 1 or 2%. Can you still afford that?" she said. "Or it may be having a customer go to a fixed rate room, splitting their loan, so they've got that certainty with the fixed rate and they know from a budgeting perspective how much money they will spend in a month. But then they also get that variable rate where they can take advantage of, if it goes up or down. So it's just really putting things in place like that.
"And it's about taking that extra care and not just being a transactional broker, where it's just about getting the loan through," Julian said. "It's really about working for the customer to make sure either feel supported. And also that they actually have a good solid game plan before purchasing the property."
