New home sales continue to fall

HIA’s most recent New Home Sales Report showed that total seasonally adjusted new home sales declined by 3.0 per cent during October 2015.

Detached house sales fell by 4.1 per cent for the month nationally, with declines in four of the five mainland states.

Victoria experienced the biggest drop in detached house sales (9.3 per cent), followed by Western Australia (5.4 per cent), Queensland (0.9 per cent) and New South Wales (0.8 per cent). South Australia was the only mainland state to see an increase in detached house sales – up 2.6 per cent in October.

HIA chief economist Harley Dale said new home sales are not far below their historically high peak, consistent with only a moderate decline in dwelling commencements in the short term.

“Within the aggregate profile, detached house sales are up over the three months to October in all three eastern seaboard states,” he said.

Mr Dale noted that new dwelling commencements have increased over three consecutive years to a record high, and leading indicators like new home sales and ABS building approvals suggest a fourth healthy year in 2015-16.

“That’s an impressive outlook which will remain of considerable value for the wider Australian economy, given that a peak in new housing tends to be immediately followed by a sharp decline,” he said.

“The risk will emerge ahead of 2016-17. The lagged effect of slowing population growth and the unprecedented uncertainty around higher rise construction is unfortunately being exacerbated by higher variable mortgage costs and a broader reach for investor credit rationing than required.”