Daily Commentary BY THE CURVE TEAM –

Home Sales Soar

20th of April, 2021

The deadline of a key government policy appears to have set home sales alight.

March 31 marked the end of the HomeBuilder grants. It appears that in a rush to receive the grants sales rocketed up 90.3% over March.

This follows a similar surge in December which was the last month $25 000 grants were available before being reduced to $15 000. In December home sales were up 91.8%, which was the highest rise since 2004.

This will likely translate to strong building and loan approval numbers for at least March. It should also put more pressure on already rising house prices.

It makes it difficult to discern what levels of building and finance approvals are sustainable. There will likely be a sharp drop in at least building approvals when HomeBuilder ends, but it is unclear what levels they drop to over the medium term.

Determining the sustainable level of economic activity will be crucial. Currently, economic activity is being heavily supported by extremely loose monetary and fiscal policy.

If the economy falters as policy is unwound, then it is harder to justify further unwinding. But if the economy remains strong then there is more justification in gradually unwinding policy so the economy can be self-sustaining rather than too reliant on government and monetary policy.

Josh Stewart

Associate - Money Markets