October 13, 2020

AMW: House prices holding up more than rents as population growth slides

House prices have held up surprisingly well during the pandemic, with household incomes supported by various measures (JobKeeper, JobSeeker, super withdrawals and interest rate cuts), while repayment deferrals have limited forced sales to date.

Download the reports for the full picture:

Australian Markets Weekly: house prices holding up more than rents as population growth slides


  • A sharp bounce back in activity has also occurred in states where the virus is under control. According to ABS Payrolls, Australia has regained 68% of jobs when excluding Victoria, with sharper recoveries in WA, SA and the NT.
  • Therefore, it’s no surprise to see house prices higher in Perth, Brisbane and Adelaide over the past month (partly helped by relatively little new supply in the wake of the post mining boom slump), while prices have fallen in Sydney and Melbourne.
  • In contrast, rents have fallen sharply in Sydney and Melbourne. A plunge in population growth driven by closed international borders is the main driving force, with population growth at its weakest since 1916. Importantly, while population growth is set to recover by 2023-24, the population will still be 1.6m smaller than previously projected by 2030.
  • Going forward, the trajectory of house prices is less certain. Around 7% of home loans are currently on deferral (down from a peak of 8% in June), though the RBA notes banks have assessed that around 15% of the deferred loans to date are at risk of being unable to resume repayments once the deferral period ends come March 2021.

Week ahead

  • Australia: Governor Lowe is speaking on Thursday, followed by key employment data on the same day. Dr Lowe’s speech will be closely watched to see whether it cements expectations for further policy easing in November, and on the Bank’s appetite to undertake outright QE. Markets will also be asking what else the RBA is willing to do if conditions were to deteriorate and whether the Bank would cross their red lines on negative rates, FX intervention and monetary financing. As for employment, consensus sees a -35k decline (NAB -75k) as the Victorian lockdown bites and for unemployment to rise to 7.1% from 6.8% (NAB 7.3%).
  • International: Three themes are likely to dominate: (1) US earnings season kicks off on Tuesday where earnings are expected to improve with projections of a 20% y/y fall in Q3, compared to the 32% drop for Q2; (2) US election polling, where chances of a Democratic clean sweep have risen and has seen the USD and bonds come under pressure, as Democrats are seen to be more willing to open the fiscal taps; and (3) Brexit comes back into play with the UK PM’s October 15 deadline for progress fast approaching. The base case though remains for another delay to the UK-EU trade negotiations. Specific key data points include US Retail Sales on Friday and Chinese Financing Figures due anytime.

Please see attached for further details

Charts of the week:

Chart 1: House prices rising in Adelaide, Brisbane and Perth

Chart 1: Population growth to be the weakest since 1916

Customers can receive Australian Markets Weekly and other updates directly in their inbox by emailing nab.markets.research@nab.com.au with the name of their NAB relationship manager.