By the end of May, mortgage applications for home purchase had fully reversed their earlier drop. New home sales have also performed better than expected, with a surprise month-on-month rise in April. However, with credit conditions tightening, inventory at record lows and home purchase sentiment at a 30-year low, we doubt existing home sales will see a similar rapid recovery. Builders appear to have resorted to discounting to support sales, and a collapse in house price expectations points to a small fall in overall house prices of 2% to 3% by early next year. Surveys of rental markets show a marked loosening in conditions in recent months, and that will weigh on apartment construction. Significant support for incomes during the coronavirus has kept rental arrears to a minimum, but landlords will find it difficult to raise rents in the current environment.
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