Is the Commonwealth Bank of Australia (ASX: CBA) share price worth buying right now?
Investors have certainly said yes to that question during 2019 with the share price up 15.7% in the calendar year to date.
CoreLogic's latest monthly release showed that national house prices were flat over July 2019, although Sydney, Melbourne and Brisbane all registered a 0.2% rise in their property values. Even so, this small result was after a heap of good news with two RBA cuts, an APRA shift of interest rate buffers and the Liberal federal election win.
I think the key test will be what house prices do over Spring, so the next four months will be the sign of whether this is a temporary reprieve or a genuine stabilising of house prices.
AMP Limited's (ASX: AMP) Shane Oliver shared some stats this week showing that dwelling building approvals continue to fall. In June year on year building approvals were down over 25%, which will put further pressure on the construction sector in the medium-term.
Growth in housing related debt is also falling, credit growth in June was up only 0.1% month on month and 3.3% year on year.
CBA's profit and dividend can only grow if the economy is doing well and credit growth picks up – which it isn't at the moment. Households are already heavily indebted and long-term wage growth is minimal, there simply isn't much flexibility for the Australian public to increase their spending or borrowing, particularly with the younger generation. We are also seeing property developers now going under.
It's this environment that CBA finds itself in, whilst also paying out hundreds of millions of dollars in remediation and being told to hold more capital by regulators.
Foolish takeaway
I just don't see the odds being in CBA's favour for good returns in FY20, particularly if its net interest margin (NIM) declines. I can think of plenty of ASX shares I would rather invest in for my portfolio instead.
