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New home sales bounce, building approvals to follow

The sale of newly built homes saw a 5.7 increase in September, the second consecutive month of growth in the sector.

The September edition of the New Home Sales report completed by the Housing Industry Association (HIA) shows a 5.7 per cent rise in the sales of new homes built across Australia.

The increased buying activity of new homes in September was largely driven by growing demand in South Australia (up 18.0 per cent), Western Australia (13.6 per cent) and Victoria (11.0 per cent).

However, Queensland was the only state to achieve growth compared to the June quarter.

Despite these lifts over the month, new home sales for the September quarter are down 1.5 per cent compared to the June quarter, which saw a boost in activity both immediately prior and following the federal election in May.

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According to the HIA report, new home sales are a “leading indicator” of the future for building approvals, suggesting that while approvals are down 16.2 per cent from the same time last year, the tides may be turning shortly.

HIA economist Angela Lillicrap commented: “This improvement in sales is a welcome reprieve from the steady decline that emerged in late 2018.

“It remains too soon to confirm that we have passed the bottom of the cycle, but this result does highlight that we are not likely to see further material falls in new home sales.”

Lower interest rates and the easing of serviceability assessments has seen investors and first home buyers return to the market, which HIA said is likely to stimulate the new home market, and see an increase in building approvals.

“The easing of APRA’s lending restrictions and the RBA’s rate cuts have started to have a positive impact on the new home market,” Ms Lillicrap said.

“With the addition of the government's First Home Loan Deposit scheme likely to see an additional increase in first home buyer activity, we expect that the improvement in new home sales will be sustained,” she concluded.

Uptick in building approvals

Off the back of the HIA report, newly released data from the Australian Bureau of Statistics suggests that, along with new home sales, building approvals are also on the rise in September.

Building approvals increased 7.6 per cent (in seasonally adjusted terms) in September, although remain well below 2017 levels.

The increase was driven by a 16.6 per cent increase in private dwellings excluding houses, suggesting a renewed hunger for off-the-plan apartments.

Further, approvals for detached private houses increased by 2.7 per cent compared to August.

Similarly to new home sales, while building approvals saw a bump in September, numbers were down on the previous quarter, in this case by 2.4 per cent.

HIA chief economist Tim Reardon said the figures suggest that confidence is returning to the home building market, which is not yet believed to have hit the bottom of its correction.

“It remains too soon to confirm that we have passed the bottom of this cycle, but this result is another indication that the market is stabilising,” Mr Reardon said. 

[Related: RBA’s ‘heavy lifting’ to carry housing market in 2020]

New home sales bounce, building approvals to follow
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