New home sales up for the first time in 2018

The June instalment of the Housing Industry Association’s New Home Sales Report has revealed that new home sales rose by 2.2 per cent on the previous month, marking the first time sales have risen in 2018.

However, due to the constant decline over previous months, new home sales were still down for the financial year, according to Tim Reardon, principal economist at the HIA.

“Despite the monthly bounce in June, new home sales during the entire [2017–18] financial year were 5.3 per cent 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 per cent lower than in the last six months of 2017.”

The general decline, Mr Reardon said, was attributable to the current trend of housing market conditions, such as tightening credit from banks responding to house price declines and the royal commission into banking.

“Even after this slowdown, overall building activity remains elevated when compared with building levels over the past decade,” the principal economist added.

The HIA New Home Sales Report analysed the progress of each of the major markets across the country:

New South Wales

New home sales rose by 8.3 per cent over the month of June, but over the last financial year, sales were down by 13.3 per cent.

“The latest fall in sales is consistent with our expectation that, overall, house building is in the early stages of a downturn. Tightening credit conditions and falling house prices are slowing the market from recent record high levels of activity,” the report noted.

“While population growth in NSW has remained strong, the pace of this growth has slowed and this could emerge as a key risk of a larger than expected downturn in new house building.”

Victoria

The only state to record a decline, Victoria has new home sales that declined by just 0.4 of a percentage point over the last month, but the number is up by 7.8 per cent over the 2017–18 financial year.

In fact, this is the fourth month in a row where Victoria recorded a decline in house sales, which means, according to the report, “the Victorian market finally reached its peak of early this year”.

Queensland

New house sales rose by 2.8 per cent over June but was down by 13 per cent over the last financial year and is the beginning of a predicted decline in new house starts.

“Our view is that Queensland is right in the midst of a turning point in its new house building cycle; namely, 2018 will represent the first year in seven where detached house starts record a decline,” the report stated.

South Australia

A more positive sign, new house sales in South Australia were up by only 0.2 of a percentage point for June and were also up by 22.6 on the previous financial year, and is expected to be part of an upturn for the state.

“South Australia was conspicuously absent from the national new home building upcycle of recent years,” the report noted.

“[By] the same token, we expect it to avoid the emerging downturn. In fact, we expect that after declining throughout 2017, detached house starts are now in the midst of entering an upturn (even if modest) — a view affirmed by both HIA house sales and ABS house approvals being well up on their levels.”

Western Australia

New home sales were up by 1.5 per cent in Western Australia for June but are down by 20.8 per cent over the financial year 2017–18. While quite a decline, the report stated that the worst is behind the state for now.

“We’re optimistic that conditions are finally — after a protracted and painful downturn — likely to improve in line with the nascent signs of broader economic recovery in the state,” the report noted.

“We expect brick-and-mortar house building activity to finally return to growth late this year.”

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