Australia's housing boom could put an extra $300 million into the pockets of retailers, particularly electronics and homeware retailers Harvey Norman and JB Hi-Fi, and home furnishing business Adairs.
Investment bank UBS expects house prices (up 7 per cent year-on-year) and housing approvals (near record highs) to continue to gather strength.
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JB Hi-Fi buys The Good Guys
JB Hi-Fi acquisition of The Good Guys makes the consumer electronics and home appliance market another of Australia's two-horse retail races. Catie Low comments.
This is good news for retailers, which benefit from property owners feeling richer and splashing cash to improve their home.
"A strong housing market supports retail sales; both directly through completions and housing turnover, and indirectly through wealth creation (house prices)," retail analyst Ben Gilbert told clients.
"We expect near record high housing approvals, rising house prices, repair and remodel activity and falling savings rates to be tailwinds for the retail sector in 2017-18 [ending June 2017]."
Mr Gilbert said the above factors could create an extra $300 million in sales for household goods retailers this financial year, or an extra 1 per cent.
The gain could be higher still if house prices pick up more than expected, or sales numbers increases.
On the flip side, Mr Gilbert said any signs of a decline in house prices "would likely have material implications for both household goods and broader retail sales".
"UBS Economics expects price growth to remain strong at about 7 per cent this year ... but moderate to about flat in calendar 2017, which, while negative, could (in our view) prove conservative given falling interest rates and supply issues.
"We estimate every 50 basis point decrease in the savings rate adds a further about 0.9 per cent to household goods spending."
Gerry Harvey, chairman of Harvey Norman, said: "The more houses that are out there, the better for us, obviously."
"And when prices go up a lot in this market, people build more houses, and it's all supply and demand, they build a whole heap more.
The more houses that are out there, the better for us, obviously.
Gerry Harvey, chairman of Harvey Norman
"They've got to build them otherwise prices will go even higher again.
"Melbourne and Sydney are the worst two [markets] if you want to buy a house. But on the Gold Coast here, you can buy a house at some pretty reasonable prices, and units too. Brisbane's OK, Adelaide's OK, Perth is down on where it was, Tasmania's still OK.
"It's just if you want to buy in the inner city, and Sydney and Melbourne - they're the problem spots, but that's where the money is and the population."
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