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The Housing Industry Association’s (HIA) latest New Home Sales report has found that home sales fell by 8.1 per cent in October, following a spike in sales that occurred in September.
According to HIA senior economist Tom Devitt, the surge in sales during September was the result of “regulator changes in NSW” and was “more than reversed in October”.
“Buyers rushed to get ahead of NSW regulations that will add significantly to the cost of a new home, causing an extraordinary spike in sales in the state in September,” Mr Devitt said.
“This drawing forward of home purchasing decisions is anticipated to continue weighing on sales over coming months.
“The sales performance in October was consistent with the weakness observed throughout 2023 and will see new house starts continue to decline.”
He added that interest rates continued to weigh on confidence and that the industry is headed for its “weakest year of new house commencements in over a decade”.
In the three months to October, new home sales fell by 5.8 per cent when compared to the previous corresponding period.
Looking at the states, sales fell across South Australia, down by 20.1 per cent, NSW (17.4 per cent), Queensland (15 per cent) and Victoria (13.8 per cent).
However, Western Australia has recorded an increase of 42.2 per cent when compared to the same three-month period in 2022.
Mr Devitt further stated that the Reserve Bank of Australia’s (RBA) move to increase the cash rate to 4.35 per cent in November risks “further deepening and prolonging” the trough in home building.
“This coincides with Australia’s deepening housing crisis, with record population growth and acute rental shortages reflecting the need for a strong pipeline of new housing supply,” Mr Devitt concluded.
“Increasing the supply of homes will require policymakers to help lower the cost of building.
“This means reforms to tax, land release and planning, and loosening macroprudential rules that squeeze out owner-occupiers and investors alike.”
Investor and FHB purchases expected to rise
Prior to the November rate hike, the latest research by InvestorKit found that 2024 is expected to bring on renewed demand as interest rates begin to lower.
The report highlighted rental growth is projected to continue in Australia’s capital cities and key regional areas, with the potential for double-digit percentage increases in many rental markets.
Arjun Paliwal, founder and head of research at InvestorKit, anticipated annual rent increases ranging from $2,600 to $3,900 in the next 12–24 months as investors leave the market and demand surges.
Mr Paliwal commented: “We have seen an increase in investor sellers in the market adding to the diminishing rental supply, alongside a lack of new-build completions for investors coming on quick enough.”
At the time of the report’s release, the cost of building a house is 28 per cent higher than it was two years ago, significantly impacting new construction activities, with a 40 per cent reduction in monthly new building approvals, he explained.
[RELATED: Investor sales expected to rise by 2024]
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