Demand for detached housing continues

The New Home Sales report from the Housing Industry Association (HIA) revealed that new home sales fell marginally by 1.3 per cent in the month of October.

However, sales have remained 31.6 per cent higher for the three months to October compared with the same time last year.

Across the country, new home sales in the three months to October were higher in all regions when compared with the same period in 2019.

Sales rose by 132.2 per cent in Western Australia, 38.1 per cent in South Australia, 26.0 per cent in Queensland, 14.6 per cent in NSW and 2.2 per cent in Victoria.  

Commenting on the monthly survey of home builders in the five largest states – which is an indicator of future detached home construction – HIA chief economist Tim Reardon said the federal government’s HomeBuilder scheme acted as a “catalyst” for the elevated level of consumer confidence in the housing market, but added that other factors have also contributed to it.

“Lower interest rates and fiscal stimulus, such as JobKeeper, have also seen households more willing to spend on housing,” Mr Reardon said.

“Households have redirected their expenditure from travel and entertainment towards housing, including renovating their home. Expenditure on small-scale renovation projects is now around 25 per cent higher than this time last year.”

New home sales have ramped up in Victoria, with a 10 per cent rise in sales in October, while sales in the past year in Victoria is 8 per cent lower than in the previous year, Mr Reardon said.

“Sales in all other regions fell in the month of October. This reflects the ending of the stimulus effect of HomeBuilder, which was designed as a short-lived mechanism to improve confidence in the housing market.”

Furthermore, Mr Reardon noted an “unexpected reversal” in the urbanisation trends of the past century, which has led to increased demand for detached housing, with a sudden shift in the population moving away from central Sydney and Melbourne and into other regions.

“The ‘sea-changers’ and ‘tree-changers’ have taken 2020 as an opportunity to pursue their dreams. Students and workers haven’t been drawn to the opportunities of the city like they have in the past and there have been few new migrants from overseas,” he said.

“As a result, metro city populations have declined unexpectedly in 2020.”

Mr Reardon predicted that the reversal in urbanisation trends would revert once the economies of Sydney and Melbourne recover from the COVID-19 crisis.

Despite this strong swing in demand for detached housing, the report found that the cancellation rate of new home projects has elevated slightly.

While the cancelation rate of new home projects is usually below 10 per cent, this increased to 16.1 per cent in October.

“This suggests that there are a small number of households that are bearing a disproportionate burden of this economic shock,” Mr Reardon said.

Commenting on the new home sales figures from HIA, federal assistant treasurer Michael Sukkar said the figures demonstrate that HomeBuilder is helping to drive tradie-led recovery by boosting the economy.

"The statistics show HomeBuilder is achieving exactly what it was designed to do. It is igniting the construction industry and helping to protect jobs right across the sector," Mr Sukkar said.
 
"HomeBuilder is delivering for Australia’s tradies and home buyers, which is driving stimulus in the economy at a time its needed most."

[Related: HomeBuilder boosts new home sales: HIA]

Malavika Santhebennur is the features editor on the mortgages titles at Momentum Media.

Before joining the team in 2019, Malavika held roles with Money Management and Benchmark Media. She has been writing about financial services for the past six years.