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New home sales rise for the first time in 2018

New home sales rose 2.0% in June 2018, the first rise this year according to HIA’s Principal Economist, Tim Reardon. Source: Timberbiz, HIA

The HIA New Home Sales report – a monthly survey of the largest volume home builders in the five largest states – provides an early indication of trends in the residential building industry.

“Despite the monthly bounce in June, new home sales during the entire 2017/18 financial year were 5.3% lower than in the previous financial year,” Mr Reardon said.

“The increase in sales in June is small in comparison with the fall in sales that has occurred throughout 2018.  New home sales for the first six months of this year are 2.9% lower than in the last six months of 2017.

“The deterioration of sales over the financial year reflects the shifts in housing market conditions. The availability of credit has tightened over the past 12 months with banks responding to the decline in house prices and the Banking Royal Commission.

“Even after this slow-down, overall building activity remains elevated when compared with building levels over the past decade.

“New home sales rose in all states except Victoria, which have been in decline since February 2018 and declined a further a 0.4% in June.

“Activity in the Victorian market has reached record levels over recent years and has remained elevated well above historical trends and well in excess of growth in other states.

“The decline in sales in Victoria is well overdue.

“A pickup in new home sales in the other states, particularly NSW, is a welcome reprieve from a year of slow sales. Sales in NSW were 13.3% lower in 2017/18 than in the previous year. Sales in NSW picked up in June 2018, by 8.3% compared with the previous month, giving a positive end to an underwhelming year.

“Across the other markets, new home sales also rose in Queensland (2.7%) and WA (1.5%) and SA (0.2%).

“Australia’s population growth has slowed over the past three quarters in response to tighter visa requirements that have constrained inward migration. The Sydney and Melbourne markets have seen a decline in their rates of population growth since 1 July 2017.

“ABS data shows approvals for private sector detached houses fell dramatically in May 2018. Approvals data typically trails the new home sales data by three to six months and the dramatic fall in approvals in May is likely to be reflected in the June data,” Mr Reardon said.