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Federal election created ‘distortion’ in home sales: HIA

The federal election in May this year created a “distortion” in home sales, according to the chief economist of HIA, who noted that the recent quarterly improvement in sales is not indicative of the housing market bottoming out.

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 the three months to July 2019 rose by 6.1 per cent over the quarter but remained 12.8 per cent lower than the same period last year. 

“The increase in the most recent three months reflects the distortion in home sales created by the federal election in May,” HIA chief economist Tim Reardon said.

“The small improvement in sales in the three months to July suggests that the decline in new home sales that has been underway for more than a year has started to slow. However, this is not an indication that the market is at the bottom of this cycle.” 

The HIA New Home Sales report revealed that new home sales decreased by 7.2 per cent in the month of July when compared to June, and remain well below the figures recorded a year earlier. 


Mr Reardon said the two consecutive reductions to the official cash rate, income tax cuts, and the repeal of regulatory restrictions have not yet flowed through, but he expects these measures to boost activity in the home building market. 

“These measures, combined with ongoing stable population and employment growth, should see new home sales improve toward the end of the year,” the HIA chief economist said. 

According to the association’s latest report, new home sales increased over the quarter in May-July 2019 in NSW (+12.7 per cent), Victoria (+5.4 per cent), Queensland (+4.1 per cent) and Western Australia (+9.5 per cent). 

On the other hand, there was a 4.5 per cent quarter-on-quarter decline in South Australia in May-July 2019, but it remains above the 10.1 per cent growth recorded in the same period last year.

Earlier this month, the HIA predicted that supply of new homes would reach its low point soon – at 20 per cent below the 2016 peak – if economic activity improves, dwelling prices stabilise, and credit tightening eases. 


“All indications are that this stabilisation will occur and prevent a more significant downturn. This will set a new market equilibrium where the supply of new homes meets, rather than exceeds, demographic growth requirements,” Mr Reardon said at the time.

[Related: New home building activity expected to bottom out]

Federal election created ‘distortion’ in home sales: HIA
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