Australia has enjoyed 27 years of consecutive positive GDP growth and a 15 year average, annual (unlevered) total return for All (commercial) property of over 10% (MSCI 2019). It has also seen an attractive 300% real price uplift of its housing market overall since 1975 (Deutsche Bank, 2018). But since 2014, some “commodity-driven” cities, saw residential prices slide (Perth is down 18% from peak) and since mid 2017 even the larger, more economically-diversified cities like Sydney and Melbourne have fallen. The depth and duration of this decline makes it the worst housing correction since 1965 (BIS Oxford Economics).
Data points through end of April 2019. Change represents month-over-month change.
Is expenditure on DIY/home improvement (landscaping, furnishings, renovations etc) contracting in this environment of declining house prices? It seems that thus far, this specific segment of retail has been holding up well. Spending in this segment actually rose by over 3% nationally in 2018. Somewhat ironically, this segment shows signs of holding up better than retail in general and that’s also despite new construction starts falling. This retail segment would thus appear to retain its defensive characteristics just as many homeowners appear to be defending their homes’ values through fixing up and improving their own and/or their investment housing. Far from forecasting contraction, Oxford expects growth in the coming 5 year period of 3.4% p.a. only modestly below the 15 year historical average of 4.3% p.a.
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