Key parts of Australia's economy are starting the year looking weak, but the housing market is one glaring exception.
There are early signs the first few weeks of 2020 have been strong for property, with two consumer surveys by banks last week showing people were becoming more bullish about bricks and mortar.
Commonwealth Bank said its survey of home-buying intentions had reached a record high. Westpac's survey of consumers also said house-price expectations had soared by a "staggering" 58 per cent in the past year, despite an overall slide in confidence this month.
After rapid house-price gains late in 2019, market researcher CoreLogic said Sydney and Melbourne prices rose by another 0.7 per cent in early January, pointing to a strong opening month.
Mortgage brokers are also arranging more loans, with broking group AFG last week reporting a 19 per cent rise in loan values compared with last year.
It's early days but, at the very least, the optimism that buoyed housing in the second half of 2019 seems to have carried into the new year, despite the hit to consumer confidence from the bushfires, ongoing sluggish wage growth and weak retail conditions.
Why would housing be immune to other forces slowing the economy? And what does all this optimism suggest about property in 2020?
The truth is, rising house prices would not come as much of a surprise to many economists, because of the close links between interest rates and bricks and mortar.
Residential property is one of the first parts of the economy to respond to cuts in official interest rates because most people need a lot of debt when buying a house. And official rates are at rock-bottom levels of just 0.75 per cent, with predictions they will fall even further this year.
But there's more than just cheap credit at play here. In the second half of 2019, banks were also allowed to slash the internal interest rates that they use when checking how potential customers would cope if interest rates were to rise.
And from this month, the government started guaranteeing a portion of 10,000 first-home buyer loans a year. The scheme allows people to take out a loan with a deposit of a little as 5 per cent, without paying the added cost of mortgage insurance.
If you put this all together, it paints a picture of strong demand for property this year.
Rising prices should also lead to more properties being listed for sale (i.e more supply), but many analysts don't think that will be enough to prevent prices climbing.
Another house-price boom would encourage more building activity, creating jobs, and could improve consumer sentiment through a so-called "wealth effect".
However, it could also create its own problems.
Rising prices would clearly worsen the problem of housing affordability, and lead to people taking on even more debt. ANZ this month pointed out average loan sizes for first-home buyers have been pushed up to a record high of about $410,000.
Another worry is that we could see a return of "fear of missing out," (FOMO), driving speculative growth in housing prices in our big capital cities.
Eliza Owen, CoreLogic's head of residential research, says the first-home buyer guarantee scheme may "marginally boost" demand from buyers, but it may only be bringing forward purchases that would have occurred anyway.
"While there's probably an element of FOMO at play, the first-home buyer cohort will probably decline as prices rise further in 2020," Owen says.
**** Source: Clancy Yeates - Sydney Morning Herald