Work under construction will act as a buffer for industry amid slowdown in new home sales, according to the Housing Industry Association
Rising cash rates have caused a rip in new home sales and there will be little respite over the coming months, a report has found.
New home sales fell by 1.6 per cent in August according to the Housing Industry Association (HIA) New Home Sales report – with sales having already declined by 13.1 per cent in July.
The report found that new home sales across July and August were at their lowest point since the pandemic lockdowns in mid-2021 which restricted the movement of people throughout the country.
HIA economist Tom Devitt says the fall over the past two months may only be a precursor for what could continue in the coming months.
“Sales of new homes over the past two months are reflective of a slowing in the market as the impact of the rise in the cash rate hits households,” Devitt says.
“This rise in borrowing costs compounds the impact of the rise in the cost of construction.
“The full impact of recent and future rate increases will continue to flow through as an adverse impact on the sale of new homes in coming months.
The New Home Sales report is produced monthly by the HIA and surveys the largest home builders in the country’s most populated five states – New South Wales, Victoria, Queensland, South Australia, and Western Australia.
Victoria led sales declines in August by dipping 15.2 per cent, while Queensland was also in the negative, declining by 1.8 per cent.
Bucking the trend was South Australia, where sales increased by 18.2 per cent, as well as NSW (+14.2 per cent) and Western Australia (+7.5 per cent).
“There remains a significant volume of work under construction and approved-but-not-yet-commenced that will provide a buffer for the industry and ensure building activity and demand for skilled trades remains exceptionally strong through the rest of 2022 and into 2023,” Devitt says.
“The concern remains that that the adverse impact of rising rates on the wider economy will be obscured by this volume of ongoing work and that the Reserve Bank of Australia goes too far, too soon.”