‘Decade-low’ of home building expected as sales drop: HIA

New home sales across the country fell by 2.4 per cent in July, which along with an increase of previous sales being called, have strengthened expectation that Australia will experience “a decade-low level” of home building over the next year, according to Housing Industry Association (HIA) senior economist Tom Devitt.

The decline in July has left sales in the three months to July 2023 down by 33.4 per cent when compared to the same period in 2022.

Sales decreased in most of Australia’s largest states compared to the previous month, with Queensland leading the decline at 11.6 per cent, followed by Western Australia at 9.3 per cent, NSW at 1.6 per cent, and Victoria at 0.6 per cent.

South Australia was the only state to record an increase in new home sales at 35.5 per cent.

Additionally, sales decreased in the three months to July 2023 when compared to the same period in 2022 in most states, led by Queensland at a 52.3 per cent decline, NSW at 48.4 per cent, Victoria at 37.2 per cent, and South Australia at 26 per cent, while Western Australia recorded the only increase of 17.3 per cent for this period.

Mr Devitt stated that even a cut to the current cash rate “would not produce a recovery in new house commencements until the second half of 2024”.

“Underlying demand for housing continues to be supported by population growth, acute shortages of rental accommodation and strong employment figures,” Mr Devitt added.

“Meeting the appropriate levels of new housing for Australia’s current and future population will require changes to the other policies that inflate construction costs.

“These are not only interest rates, but also tax settings, land release and planning reforms, and macroprudential rules that squeeze out owner-occupiers and investors alike.”

Furthermore, Mr Devitt welcomed the decision by the national cabinet to pursue a new national target of 1.2 million “well-located” homes over five years from 1 July 2024. The move aimed to address concerns over affordable housing demand in the midst of Australia’s housing supply shortage.

Prime Minister Anthony Albanese confirmed this would be an additional 200,000 new homes above the National Housing Accord target that was agreed to by states and territories last year.

“The National Cabinet’s recent announcement to increase its five-year housing supply target is a welcome step in the right direction,” Mr Devitt said.

“Coordination among all levels of government and the industry will be crucial to achieving this goal.”

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