Covid-19 Sees Food, Alcohol Sales Surge 40pc

<div class="row" data-reactroot=""><div class="cell cs12 cx12"><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><p>As mall owners and retailers continue to bear the brunt of coronavirus-related trade <a href="https://theurbandeveloper.com/articles/discretionary-retail-hurts-as-stockpiling-benefits-supermarkets-">restrictions</a>, individual retail sectors are seeing “highly divergent” consumer responses to the crisis.</p><p>The Covid-19 pandemic has caused an extraordinary surge in food and alcohol sales, along with a sharp drop in clothing and footwear, figures show.</p><p>NAB’s cashless retail sales data for March shows supermarkets and grocery stores were up 34.5 per cent on last year, while liquor and other specialised food grew 40.2 per cent year on year, as consumers stockpiled supplies.</p><p>Other retailing also surged, with pharmaceuticals, cosmetics and toiletries up 34.6 per cent. </p><p>“Our data shows frankly wild swings across industries in response to the coronavirus crisis,” NAB chief economist Alan Oster said.</p><p>Footwear fell 21.7 per cent year-on-year, while clothing was down 17.4 per cent.</p><p>“Given people are increasingly unable to leave the house, a lack of interest in clothing is perhaps unsurprising.” </p></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><hr/></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><p><strong>Year-on-Year growth (%)</strong></p></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><table><thead><tr><th></th><th>Jan-20</th><th>Feb-20</th><th>Mar-20</th></tr></thead><tbody><tr><th>NAB Cashless Index*</th><th>9.1</th><th>10.3</th><th>16.1</th></tr><tr><th>ABS Retail Trade</th><th>2.0</th><th>1.8</th><th>--</th></tr><tr><th>NAB ABS Retail Trade forecast</th><th>1.1</th><th>1.4</th><th>1.6</th></tr></tbody></table></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><p><sup><sub> ^Source: NAB, ABS. *Data seasonally adjusted.</sub></sup></p><p>Pointing to a moderate rise of 0.2 per cent month-on-month in the ABS retail sales measure for March, Ostler said that overall, there was little to celebrate.</p><p>“The headline is increasingly not relevant for individual sectors facing highly-divergent consumer responses to the crisis.  </p><p>“There is good reason to think that many of the areas that surged represent essentially one-off increases to stockpile food supplies, or make purchases of home computer or exercise equipment,” Oster said, adding that supermarket purchases are already returning somewhat towards normal levels.</p><p>Efforts to contain the virus are having a very sharp impact on the economy, with many businesses essentially unable to trade due to restrictions. </p><p>Oster said that business confidence in the NAB monthly business survey was at record lows—around three times as bad as the bottom of the 1990 recession—with similar unprecedented results reported for falls in forward orders and the level of capacity utilisation. </p><p>“We now expect unemployment to reach 11.75 per cent by mid-year and remain over 7 per cent until the end of 2021.</p><p>“Consumers are unlikely to make many discretionary purchases in this environment and we expect weak retail spending prints for some time.”</p></div></div></div></div></div>

Retail sales data for March shows ‘wild swings’ across retail sectors with food and alcohol sales growing up to 40 per cent year-on-year.

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<div class="row" data-reactroot=""><div class="cell cs12 cx12"><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><p>While the trend in Australia’s house prices remained positive through March, recording a 0.7 per cent rise, housing market activity is <a href="https://theurbandeveloper.com/articles/caution-urged-as-house-prices-start-to-fall">expected </a>to plunge as <a href="https://theurbandeveloper.com/articles/coronavirus-forces-unprecedented-rate-cut">increased</a> uncertainty spreads across the property market, and wider economy. </p><p>Recent <a href="https://theurbandeveloper.com/articles/property-market-coronavirus">market trends</a> have become<a href="https://theurbandeveloper.com/articles/property-market-coronavirus"> less </a>relevant as we move into a period of <a href="https://theurbandeveloper.com/articles/coronavirus-forces-unprecedented-rate-cut">unprecedented</a> uncertainty—Corelogic’s Tim Lawless says this is likely to further erode household confidence—dragging Australia’s economy into a recession for the first time in almost 30 years.</p><p>“If we are correct in our expectation that housing market activity is set to temporarily plunge, we could see increased volatility and a reduction in certainty creep into housing market measurements until activity picks up,” Lawless said.  </p></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><hr/></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><p>CoreLogic index results as at March 31, 2020</p></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><table><thead><tr><th></th><th>MONTH</th><th>ANNUAL</th><th>MEDIAN VALUE</th></tr></thead><tbody><tr><th>Sydney</th><th>1.1%</th><th>13%</th><th>$882,849</th></tr><tr><th>Melbourne</th><th>0.4%</th><th>12%</th><th>$695,299</th></tr><tr><th>Brisbane</th><th>0.6%</th><th>3.1%</th><th>$506,553</th></tr><tr><th>Adelaide</th><th>0.3%</th><th>0.9%</th><th>$437,296</th></tr><tr><th>Perth</th><th>0.5%</th><th>-3.1%</th><th>$445,614</th></tr><tr><th>Hobart</th><th>-0.2%</th><th>4.2%</th><th>$483,032</th></tr><tr><th>DarwinDarwin</th><th>2% </th><th>-5.4%</th><th>$392,348</th></tr><tr><th>Canberra</th><th>0.6%</th><th>4.7%</th><th>$626,932</th></tr><tr><th>National</th><th>0.7%</th><th>7.5%</th><th>$554,229</th></tr></tbody></table></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><hr/></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><p>Forty per cent of the nation&#x27;s auction&#x27;s were <a href="https://theurbandeveloper.com/articles/investors-look-at-options-in-downward-market-">withdrawn</a> over the weekend, with social distancing measures resulting in open homes and public auctions banned.</p><p>Looking at mortgage rates, consumer sentiment, new lending and auction clearance rates, CBA senior economist Belinda Allen describes these as the best indicators of the direction of housing prices.</p><p>“But with volumes now so thin previous relationships may not hold,” Allen said.</p><p>“Based on the current movement of all but <a href="https://theurbandeveloper.com/articles/coronavirus-forces-unprecedented-rate-cut">mortgage rates</a> there does suggest there is downside risk to dwelling prices forthcoming.”</p><p>Last week, AMP economist Shane Oliver said that if the recession should last more than six months – with unemployment up to 10 per cent or more, house prices could <a href="https://theurbandeveloper.com/articles/property-market-coronavirus">collapse</a> by up to 20 per cent.</p><p>Up until recently, Australia&#x27;s unemployment has sat above 5 per cent.</p><p>As Covid-19 continues to roil the economy, NAB&#x27;s chief economist Alan Oster expects unemployment in the order of 12 per cent.</p><p>“Which is awful,” Oster said.</p><p>“The magnitude and speed of the economic impact dwarfs anything we’ve seen in the post-war period in Australia.</p><p>“Hopefully the good news is, it’s very short, but that will all depend on the virus.” </p><p>Lawless adds that the extent of the impact on Australia&#x27;s property values is “highly uncertain”. </p><p>“Capital growth trends will be contingent on how long it takes to contain the virus, and whether additional constraints on business or personal activity are <a href="https://theurbandeveloper.com/articles/wage-subsidy-loan-deferrals">introduced</a>,” Lawless said.</p><p>“Once the virus is contained, we expect economic conditions to quickly improve, driving a turnaround in consumer spirits which should flow through to housing market activity. </p><p>“When that will be, remains highly uncertain.” </p></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><hr/></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><div><picture><img src="https://tud-prod-tudmedia-oj9w2zshuo0o.s3.amazonaws.com/raw/images/d3e0d3bf-1cf0-4a59-a210-f9c830d46fc7.png" width="1110"/></picture><div><span style="align-content:center;opacity:0.8">▲ Australia&#x27;s housing values. CoreLogic</span></div></div></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><hr/></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><h2><strong>Housing values</strong></h2><p>The <a href="https://theurbandeveloper.com/articles/coronavirus-delays-federal-budget-15bn-loans-to-businesses">federal</a> and state government <a href="https://theurbandeveloper.com/articles/investors-look-at-options-in-downward-market-">stimulus</a> packages aim to help <a href="https://theurbandeveloper.com/articles/wage-subsidy-loan-deferrals">support</a> job retention and incomes amid Covid-19, in a move to<a href="https://theurbandeveloper.com/articles/older-australians-coronavirus-property-market"> reduce</a> casualties.  </p><p>As an <a href="https://theurbandeveloper.com/articles/star-group-stands-down-90pc-of-staff-covid-19">increasing number</a> of Australians face unemployment, Lawless says leniency from the banks for borrowers “should help to stymie” the number of properties hitting the market. </p><p>The data house expects the number of residential transactions to fall in the coming months. </p><p>“A consequence of tanking consumer confidence, a rising jobless rate, and more cautious lending practices,” Lawless said. </p><p>A major reduction in listing activity is also expected, with real estate reports noting they have more than halved in recent weeks, implying a “substantial drop in property listings in the coming weeks”.  </p><p>“Measures of housing values and prices rely on timely updates of recently sold properties, a material slowdown in turnover is likely to create some challenges over the coming months in how we report on market conditions,” Lawless said. </p></div></div></div></div></div>

While the trend in Australia’s housing values remained positive through March, the property market is expected to plunge.

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<div class="row" data-reactroot=""><div class="cell cs12 cx12"><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><p>NAB economists expect Australia’s dwelling prices across the capital cities to fall by 10 per cent to 15 per cent over the next 12 to 18 months. </p><p>NAB chief economist Alan Oster said Australia’s dwelling prices could fall by around 10 per cent this year, with declines led by Sydney and Melbourne, and further falls posted in the first half of 2021, before “levelling off”.</p><p>Oster said he expected Sydney house prices to fall 2.9 per cent this year, followed by 2.6 per cent next year. </p><p>Melbourne house prices are forecast to fall 4.8 per cent this year, and 3.6 per cent in 2021. While Brisbane house prices are forecast to fall 3.7 per cent this year, followed by an 8.6 per cent drop in 2021.</p><p>“While interest rates are very low and will act to support prices, rising unemployment, slower wage growth and weak confidence will weigh on prices,” Oster said. </p></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><hr/></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><h2><strong>NAB house price forecasts </strong></h2></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><table><thead><tr><th></th><th>2018</th><th>2019</th><th>2020f</th><th>2021f</th></tr></thead><tbody><tr><th>Sydney</th><th>-10.0</th><th>6.1</th><th>-2.9</th><th>-3.6</th></tr><tr><th>Melbourne</th><th>-9.1</th><th>4.6</th><th>-4.8</th><th>-3.6</th></tr><tr><th>Brisbane</th><th>0.4</th><th>0.4</th><th>-3.7</th><th>-8.6</th></tr><tr><th>Adelaide</th><th>1.3</th><th>-0.3</th><th>-3.9</th><th>-7.0</th></tr><tr><th>Perth</th><th>-4.3</th><th>-6.7</th><th>-1.2</th><th>-3.5</th></tr><tr><th>Hobart</th><th>8.3</th><th>4.0</th><th>0.5</th><th>-2.4</th></tr></tbody></table></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><p><sup>Source: CoreLogic, NAB Economics</sup></p></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><hr/></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><p>NAB’s house price forecast comes as ANZ <a href="https://theurbandeveloper.com/articles/house-prices-to-fall-10pc-anz">announced</a> it expects a fall of a 10 per cent peak-to-trough fall for house prices, before a modest recovery in late 2021</p><p>The NAB hedonic forecast for units across the capital cities show larger price drops are expected, with a 10 per cent drop in Melbourne’s unit prices this year, followed by a 4 per cent drop in 2021. </p><p>Sydney units are expected to fall 8.8 per cent this year, and 4 per cent in 2021. While unit prices in Brisbane are tipped to fall 5.5 per cent this year, followed by 8.6 per cent next year. </p><p>“Also, while we do not see a fundamental over-supply in the market, with construction continuing to decline, a slowing in migration will see demand for housing soften somewhat.”</p></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><hr/></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><h2><strong>NAB unit price forecasts (%)</strong></h2></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><table><thead><tr><th></th><th>2018</th><th>2019</th><th>2020f</th><th>2021f</th></tr></thead><tbody><tr><th>Sydney</th><th>-6.3</th><th>3.4</th><th>-8.8</th><th>-4</th></tr><tr><th>Melbourne</th><th>-2.3</th><th>6.5</th><th>-10</th><th>-4</th></tr><tr><th>Brisbane</th><th>-0.7</th><th>0.1</th><th>-5.5</th><th>-8.6</th></tr><tr><th>Adelaide</th><th>1.7</th><th>0.5</th><th>-2.7</th><th>-7</th></tr><tr><th>Perth</th><th>-6.5</th><th>-7.2</th><th>-1.5</th><th>-3.5</th></tr><tr><th>Hobart</th><th>10.2</th><th>3.9</th><th>-3.3</th><th>-2.4</th></tr></tbody></table></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><p><sup>Source: CoreLogic, NAB Economics</sup></p></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><hr/></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><p>As a result of the Covid-19 related containment measures, NAB expects “a sharp deterioration” in the labour market, with unemployment to rise to 11.7 per cent by mid-year followed by a “partial recovery” to 7.3 per cent by the end of 2021.</p><p>The Reserve Bank of Australia announced on Friday it expects unemployment to reach 9 per cent by Christmas, up from the previous forecast of 5.1 per cent. The central bank <a href="https://theurbandeveloper.com/articles/coronavirus-employment-shock-34m-housing-market">expects</a> unemployment to still be sitting around 8.5 per cent by June 2021. </p><p>Alongside house price declines, NAB expects dwelling construction to continue to fall. </p><p>“The pipeline of work yet to be done remains relatively elevated in New South Wales and Victoria, but this will be rapidly eroded with high rates of work done,” Oster said. </p><p>“Building approvals remain low and are expected to decline further, suggesting little replenishment of the pipeline of work.”</p><p>ANZ economists said they <a href="https://theurbandeveloper.com/articles/house-prices-to-fall-10pc-anz">expect</a> housing construction activity to decline 15 per cent through 2020-21, bringing the cumulative peak-to-trough decline to 25 per cent. </p></div></div></div></div></div>

NAB economists expect Australia’s house prices across the capital cities to experience falls by 10 - 15 per cent over the next 12-18 months. 

ALAN OSTER