Finance Property Falling luxury car sales point to a spending crunch in housing

Falling luxury car sales point to a spending crunch in housing

Falls in luxury car sales often coincide with house price drops.
The Australian Taxation Office is coming after people with yachts, private planes and other expensive assets. Photo: Getty
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Federal government policies may finally have tapped the brakes on the housing market, but in doing so they might have also put the luxury car market into a spin.

Double-digit gains in luxury car sales turned south just before the softening of real estate prices in Sydney and Melbourne, and they look set to continue as homeowners in the top end of the market don’t feel so flush anymore, according to Commsec analysis.

Sales are down 7 per cent from last year, after sales reached record highs in 2016, with sales of more than 106,000. That’s after a 5.6 per cent fall in 2016-17.

Commsec senior economist Ryan Felsman called luxury car sales “a leading indicator” of consumer spending as fewer luxury cars mean there’s less money being thrown around.

“What we’re seeing is a bit of a downdraft in confidence, people are being more cautious in their spending,” Mr Felsman said.

Anyone with eyes on an Aston Martin, Audi, BMW, Bentley, Ferrari, Hummer, Jaguar, Lamborghini, Lexus, Lotus, McLaren, Maserati, Maybach, Mercedes-Benz, Morgan, Porsche or Rolls Royce will find themselves lumped into the luxury car market and this Commsec index.

Mr Felsman said because house price falls in Sydney were being keenly felt at the top end of the market, this was feeding the falls.

Cars have never been so affordable

This is despite cars being at their most affordable in 30 years, thanks to a strong Aussie dollar and inflation figures which have made luxury vehicles a possibility for many Australians.

This was confirmed in the latest Federal Chamber of Automotive Industries new vehicle sales data, which revealed Australians were buying more new cars than ever before.

We bought a total of 1.202 million new vehicles in the year to March, up 2.5 per cent from a year ago.

Sales of SUVs and light-commercial vehicles are doing the heavy lifting in  new vehicle sales, pointing to Australia’s growing love of big cars, while the sale of passenger vehicles is actually down 7.3 per cent.

The most popular cars in Australia last year remaining the Toyota Hi-Lux, Ford Ranger and Toyota Corolla.

Mr Felsman said the strong jobs market, particularly in construction, was supporting the demand for these vehicles.

Callam Pickering, APAC economist at jobs site Indeed, agreed the strong jobs market was supporting the vehicle sales.

But he questioned whether the fall in luxury vehicle sales was being caused by the falling housing market, or whether Australians were reacting to movements in the financial markets.

“It makes perfect sense to me that if you have strong employment growth you would see strong motor vehicle sales,” he said.

“The business sector is doing quite well, and they’re buying a lot of vehicles, but motor vehicle sales for households are much weaker.”

Weak vehicle sales = weakness in housing

And it’s the weakness in consumer spending and strong business spending that might explain why consumer confidence and vehicle sales are heading in opposite directions.

Businesses and workers are buying cars that suit them, while families are putting off upgrading amid concern for jobs or mortgages.

And while prices at the top end of the housing market have experienced falls, house prices at the bottom end of the market haven’t been immune, despite the return of throngs of first-home buyers to the market.

Commsec’s Ryan Felsman said: “The bottom 25 per cent of houses by value have decelerated – they peaked back in the middle of last year, they’re now flat-lining.”

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