New home sales facing downturn

The latest Housing Industry Association’s New Home Sales Report has shown that new home sales fell by 4.4 per cent in May following a 4.7 per cent fall in April.

In the month of May, detached house sales declined in three of the five mainland states.

NSW recorded a drop in detached house sales of 11.5 per cent, followed by Victoria, which experienced a fall of 8.2 per cent.

In Queensland, detached house sales fell by 11 per cent.

Meanwhile, detached house sales increased in South Australia by 3.8 per cent and in Western Australia by 5.4 per cent.

However, despite this downturn, HIA chief economist Harley Dale emphasised that there is no cause for concern.

"There is nothing alarming to a reversal in the trend for new home sales," Mr Dale commented.

"There is a cyclical downturn ahead for new residential construction activity, as new home sales signal, but the early pull-back will be mild by historical standards."

Mr Dale said that the HIA is of the view that a decline in new dwelling commencements will gather momentum in the next two financial years, following four years of growth that have been significantly beneficial to the broader Australian economy.

"This economic benefit delivered by new home construction in recent years is unprecedented," Mr Dale said.

"It creates a platform for the federal government to provide leadership on the key issues of new housing supply, affordability and home ownership, which will in turn benefit Australia’s economic growth and future standard of living."

[Related: Investors 'doubling up' on Aussie real estate]