This week I take a look at whether Australia has hit peak Hamptons and what the latest GDP figures mean for the outlook for property prices
Has Australia hit peak Hamptons?
I don’t think I have ever heard anyone say they are keen to do a Tuscan inspired renovation but looking around many suburbs of Australia, I am sure that in the 1980s it would have been a popular discussion point. This discussion possibly then moved on to Balinese inspired outdoor areas and then perhaps shabby chic decor. My timeline is possibly wrong (I am an economist after all, not a design expert or cultural anthropologist) but looking around where I live, even I can clearly see that the Hamptons style is currently the most popular.
Hamptons style suits the Australian climate, particularly our desire for indoor/outdoor living and a relaxed lifestyle. More recently, with many of us stuck at home for long periods since the start of the pandemic, it has suited our desire for more space. But like our desire to be more Tuscan, at some point, our desire to live Hamptons style will fade away and something else will come in its place. The trend that apparently is expected to come next is, I am reliably informed by Instagram, Palm Springs style.
Looking at Google searches for both Hamptons and Palm Springs you can see that both trends bumped along up until the start of the pandemic fairly evenly. Hamptons over this time easily above Palm Springs. There was a brief unexplained surge for Hamptons in mid 2018, perhaps explained by some late interest following the screening of The Block Season 13. Once the pandemic hit in March 2020, Hamptons surged in popularity, while our desire for desert friendly Palm Spring style dropped back substantially.
Interestingly, Palm Springs leapt up to briefly surpass Hamptons at the start of 2021. There could be a number of reasons for this. Perhaps record movement of people to regional areas allowed people to dream more about sprawling Palm Springs homes on huge blocks. Perhaps higher savings rates allowed us to consider expensive Palm Springs style palm trees, as opposed to cheaper Hamptons style hedges. Whatever, the driver, it was brief and Hamptons is now back, easily the most searched for term above Palm Springs.
While Palm Spring fights for supremacy in our preference for housing design styles, it may need to look out for some contenders. When Clarendon, or one of the other major home builders, comes out with their latest Brutalist design, I will see that as a sign we are starting to move on from Hamptons.
Latest GDP figures shows decent economic growth but it is hard to get too excited
Life was looking pretty good up until the end of June. We were still seeing a few lockdowns here and there but across pretty much every economic data point, we were seeing growth - more retail spending, more employment, better business conditions. Fortunately we weren’t seeing rapid growth in COVID cases like we are seeing now.
Conditions of course changed at the end of June as Sydney went into lockdown. With Victoria currently also locked down, most Australians can’t work the same way they did in June. Unemployment is rising again and people are spending less. At this stage, we certainly aren’t in recession, but September GDP growth will slow dramatically and may even contract.
For property, this lockdown appears to be providing a boost to pricing, even though economic growth is pulling back. It is difficult to see at an aggregate level what is happening to prices given there are so few transactions taking place. Our own analysis of weekly auction data however continues to show far fewer properties going to auction, far more people actively bidding at auction and a bigger gap between highest prior offer and the price properties are selling at auction.
In New Zealand, strong housing finance growth has been slowed by regulators stepping in placing restrictions on lenders. Announcements made in March to loan to value ratios lead to a quick plateauing of house prices. For now, it is likely regulators are holding off in Australia, no doubt not keen to impact business and consumer sentiment more negatively than it already is. Housing finance is also unlikely to be rising all that much right now anyway given that there isn’t much to buy. Once we get out of lockdown, and if housing finance roars off again, we can expect to see a similar set of measures being introduced in Australia.
