Australian new home sales tumbled in September, driven by a large decline in apartment purchases.
According to Australia’s Housing Industry Association (HIA), total sales fell by 6.1% over the month, largely reversing a 9.1% surge in August.
As seen in the chart below from the group, total sales now stand close to the lowest levels since
By type of dwelling, housing sales fell by 4.5% with all mainland states bar New South Wales recording a decline over the month.
Sales fell by 15.1% in Western Australia, outpacing falls of 8.7%, 2.3% and 1.7% in Queensland, Victoria and South Australia.
New South Wales managed to buck the trend with housing sales lifting by 3.7%.
Helping to explain the weakness in the national figure, sales of apartments slumped by 16.7% from August.
Talk of an oversupply of apartments in some of Australia’s eastern capitals, tighter restrictions on local and foreign investors, the prospect of higher mortgage rates and signs of price weakness in some markets may explain the drop in apartment sales seen in recent months.
The HIA says that the drop in sales volumes, particularly for apartments, points to the likelihood that building approvals will continue to trend lower in the period ahead.
“New home sales is a leading indicator of approvals data and shows that building activity peaked in March 2016 following the longest ever upturn in new home building,” said Shane Garrett, Senior Economist at the HIA.
“This process of adjustment will involve quite sizeable reductions both in building activity on the ground.
“We expect that activity will bottom out sometime in 2019 with a recovery then setting in, assuming the economy reverts to its long-term average growth rate of around 3%.”
The Australian Bureau of Statistics (ABS) will release building approvals data for September on Thursday, November 2.
Some forecasters point to potential weakness in residential construction in the coming years as a factor that will see economic growth undershoot the Reserve Bank of Australia’s expectations, preventing it from lifting interest rates as softer employment growth keeps wage and inflationary pressures in check.