New home sales up for second consecutive month: HIA

According to the Housing Industry Association’s (HIA) New Home Sales report, sales of new homes increased by 9.4 per cent in the month of May 2023 when compared to the previous month, with sales in the last three months being 4.4 per cent higher than the previous quarter.

HIA senior economist Tom Devitt said sales increased for the second consecutive month despite the continued rise in interest rates.

However, sales of new homes in the three months to May 2023 compared to the same period last year were still down in most states, led by NSW (-63.6 per cent), followed by Queensland (-52.9 per cent), Victoria (-46.6 per cent), and South Australia (-29.5 per cent).

Over the year, Western Australia was the only state that saw an increase, up by 19.4 per cent.

“Despite this small rise in sales, they remain at depressed levels,” Mr Devitt said.

“Sales in the three months to May 2023 were more than 40 per cent lower than in the year before when interest rates started to increase and 25 per cent lower than prior to the pandemic.

“This indicates that the slowdown in home building that is underway will continue for at least the next year.”

Mr Devitt added that the Reserve Bank of Australia’s (RBA) rate hikes will further hold down new sales and result in further project cancellations as finance becomes inaccessible for an increasing number of buyers.

“The most significant contraction in sales is in NSW where customers are more sensitive to rises in the cash rate,” Mr Devitt said.

“Cancellations also remain elevated at a rate of 25 per cent in the last quarter. This means, for every four new projects a builder is recording, a previous project is being cancelled.”

In addition, the increase to the cost of land and construction across all jurisdictions is compounding the impact of higher rates, according to Mr Devitt.

“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,” concluded Mr Devitt.

“This combination of factors will see home building continuing to contract for at least the next 12 months to its lowest level in more than a decade.”

[RELATED: New home sales bumped up in April]