Here’s a quick look at the five-year chart for the price of copper:
You can see it’s threatening to break through US$3/lb, this despite much gloominess surrounding the property market.
In certain parts of Australia, the fear around a housing price collapse is palpable.
For instance, our editor Catherine Cashmore recently said as far as Melbourne is concerned — ‘Sentiment is at an all-time low.’
But there are a few conflicting signals here which needs to be addressed.
US housing market’s effects are important to Aussie residential property market
The flight to the burbs is on.
In the US, people are realising living in a dense city is not that appealing in the current circumstances.
This from Reuters:
‘U.S. homebuilding increased in June by the most in nearly four years amid reports of rising demand for housing in suburbs and rural areas as companies allow employees to work from home during the COVID-19 pandemic.’
‘Housing starts increased 17.3% to a seasonally adjusted annual rate of 1.186 million units last month, the Commerce Department said. The percentage gain was the largest since October 2016. Data for May was revised up to a 1.011 million-unit pace from the previously reported 974,000.
‘Still, homebuilding remains 24.3% below its February level. The South and the West accounted for about 75% of housing starts last month. Economists polled by Reuters had forecast starts increasing to a rate of 1.169 million units.’
The GFC showed the wide-ranging and adverse impacts the US housing markets can have on the global economy.
And the converse is true when the numbers indicate expectation-defying strength.
This is where copper comes in, and something to keep your eyes peeled for
One of the key sources of copper demand is construction — new homes and infrastructure projects require an immense amount of it.
It’s the boom time commodity.
So perhaps the copper price is signalling that stimulus money is actually flowing through to these projects.
And that the Aussie property market may dodge a bullet.
Going forward, the use of copper in EVs and in particular EV charging stations is likely to be a growing source of demand as well.
Germany, for instance, is using stimulus as a way to accelerate the EV revolution with aggressive subsidies.
Point is, watch the copper price closely and you may not have the direst view of the global economy and the US housing market.
This should provide a level of support, albeit indirectly for the Aussie property market.
For Profit Watch
PS: Australian market expert, Callum Newman, reveals the unexpected impact of the lockdown he sees on the property market — where real estate prices could take a short-term hit before quickly rising to new heights. Click here to learn more.