Sales and starts show fresh signs of life

The most recent data have provided support for our view that the sharp drop in sales and starts seen over the past few months would prove temporary. New and existing home sales, as well as housing starts, all rose. To be fair, the gains were typically fairly moderate and forward–looking indicators are still subdued. Therefore, it is too soon to be sure that activity measures have done much more than form a base. However, as the economy strengthens, we expect housing market activity to follow. That said, we also expect supply conditions to continue to normalise suggesting that double-digit rates of house price inflation will soon become a thing of the past.