Australian residential investment weak but sales recovery bodes well

While Australia's residential investment (accounting for roughly 25% of steel demand) is yet to recover, the housing starts lag property sales by roughly 1-2 quarters. 

"The sales have been recovering since 2Q suggesting some improvement in housing investment by 4Q is likely", says BOFA Merill Lynch. 

The government has rolled out more property supportive policies recently, including lower mortgage down-payments for second-homes and easing property investment rules for foreigners. 

"While it seems unlikely that residential investment will reach anywhere near the growth rates prior to 2014, a recovery could nonetheless provide a short-term boost to steel demand and prices that remain at depressed levels", added BOFA Merill Lynch.