New home sales continue to fall in March: HIA

The monthly HIA New Home Sales report found that the sale of new homes across the country fell by a further 7.2 per cent in March when compared to the figures observed in February.

HIA senior economist Tom Devitt said the latest decline has left sales in the first three months of the year down by 45.9 per cent when compared to the same quarter last year.

The largest sales declines for March were seen in Victoria, which dropped by 23.4 per cent and South Australia that dropped by 22.4 per cent.

This was followed by Queensland at a decline of 2.2 per cent, while NSW and Western Australia recorded increases of 1.7 per cent and 22.5 per cent, respectively.

According to the report, NSW drove the declines over the last year, with sales in the first three months of 2023 being down 75.9 per cent on the same quarter in 2022, followed by Queensland at a 54.3 per cent decline, Victoria at 43.4 per cent, and South Australia at 13.7 per cent.

Contrarily, Western Australia was the only large state to record an increase over the last year, which was up by 1 per cent.

“The RBA’s rate increases last year and this year will continue to hold down new sales and cause further cancellations as finance becomes unobtainable for an increasing number of buyers,” Mr Devitt said.

“The significant increase in the cost of land and construction across all jurisdictions over the past two years is compounding the impact of higher interest rates.

“The additional costs of compliance with the National Construction Code, that come into effect this year, will further increase the cost of new home construction and dampen demand further.”

Mr Devitt added that the rise in projects being cancelled compounded the decline in sales, as the cancellation rate increased to 30.5 per cent in March.

“This means for every three new building contracts that are signed, one sale from a previous month is cancelled. Many builders have reported ‘negative sales’ over recent months. The last time the rate was near this high was the start of the pandemic,” Mr Devitt said.

In addition to the HIA’s findings, AMP Bank’s Econosights – Australia’s housing shortage report outlined that housing demand in Australia is rapidly rising due to a surge in net overseas migration during a time where residential construction is slowing and interest rates are rising.

[RELATED: Housing demand driven by surge in overseas migration: AMP]