Home sales resurge in ‘post-election euphoria’

According to a monthly survey of the largest volume home builders in Australia’s five largest states, undertaken by the Housing Industry Association (HIA), new home sales in May bounced back to their highest monthly level in over a year.

The HIA New Home Sales report revealed that there were more than 5,000 new home sales across NSW, Victoria, Western Australia, Queensland and South Australia in May 2019 – the first time the index has surpassed this figure since June 2018.

Further, the report showed that the volume of sales hiked up by 28.8 per cent between April 2019 and May 2019, the largest month-on-month increase in more than three years.

Notably, the report showed that new home sales in NSW jumped by a whopping 54.2 per cent, with sales in WA up by more than a third (34 per cent). 

Both Queensland and Victoria saw new home sales increase by around a quarter (26.0 per cent and 25.3 per cent, respectively), while South Australian home sales rose only marginally – by 0.9 per cent.

New home sales a sign of ‘post-election euphoria’ 

Speaking to Mortgage Business, HIA chief economist Tim Reardon added that while the combined figures for the March-May quarter were still 11.4 per cent lower than the prior comparative period, he suggested that the month-on-month spike was a sign of increased market confidence following the federal election.

He added that the figures could reflect the “bottoming out” of the current property cycle.

Mr Reardon added that the increase in new home sales in May 2019 marked the first time sales had risen by a marked percentage for more than a year. 

He told Mortgage Business: “What we’re seeing at the moment is a combination of post-election euphoria, a small interest rate cut [in June. Editor’s note: At the time of interview, the cash rate decision for July 2019 had not yet been announced], wage growth, unemployment remaining low, as well as the income tax cut that is likely to come through, all while house prices look like they’ve reached the bottom of the cycle – which provides confidence in the housing market. 

“We expected that confidence in the housing market to occur mid-year and the May numbers are already showing it. Compared to what we’ve seen for all of 2019 to date, these figures are taking us to where we were around about 12 months ago, which is a positive sign that we’re approaching the bottom of this cycle,” he said.

The HIA chief economist said that the rise in new home sales could also reflect an “easing of the credit squeeze, lower interest rates and an expectation that APRA will implement reforms to mortgage lending guidelines”.

Mr Rearson added: “This month’s result confirms our expectation that the decline in building activity will start to level off in the second half of 2019 and stabilise at a level below the highs achieved back in 2017.”

The resurgence in home sales was evident across all five states covered by the New Home Sales survey, suggesting a broad-based improvement in housing market sentiment around the country. 

“The slow start to 2019 has seen intense competition amongst home builders. The lift in sales shows that more homebuyers are seeing opportunities in this competitive trading environment. 

“Income tax cuts, solid population growth and accelerating wage growth are necessary to ensure that the market does not decline further,” concluded Mr Reardon. 

The HIA figures bolstered those released by CoreLogic earlier this week, which showed that Sydney and Melbourne housing markets had seen monthly home values increase for the first time since prices peaked in 2017.

CoreLogic’s latest Hedonic Home Value Index revealed that in June, dwelling values increased by 0.1 per cent in Sydney and 0.2 per cent in Melbourne.

The results have marked the first monthly increase in Sydney since July 2017 and the first increase in Melbourne since November 2017.

Hobart was the only other capital city to report an increase in dwelling values (0.2 per cent), with prices falling in Canberra (0.9 per cent), Darwin (0.9 per cent), Perth (0.7 per cent), Brisbane (0.6 per cent) and Adelaide (0.5 per cent).

According to CoreLogic’s head of research, Tim Lawless, the June data provided further evidence that the downturn in the housing market is “running out of steam”, adding that recent political and economic developments would accelerate the recovery.  

“The improvement in housing market conditions over the first five months of the year has largely been organic; however, since mid-May there has been a raft of announcements that should provide a further positive flow-through to housing demand,” he said.

“Stability within the federal government, along with the removal of uncertainty surrounding changes to negative gearing and capital gains tax discounts, has brought about increased certainty and boosted confidence in the housing market.”

Mr Lawless also noted the improvement in housing affordability, which he said could be supported by proposed changes to mortgage serviceability assessment guidelines and lower home loan rates.

“Overall, it looks like the tide may have turned for the housing market; however, we aren’t expecting a rapid recovery phase,” he said.

[Related: ‘Tide turning’ as prices in Sydney and Melbourne lift]