- Australian new home sales fell 2.9% in August, adding to a 3.1% decline in July.
- As a lead indicator for housing approvals and starts, this points to a further slowdown in residential building activity in the period ahead.
- Australia’s HIA is forecasting a 10.6% decline in home building in 2019.
Australian residential building approvals tumbled in August, falling by a massive 9.4%, adding to a 4.6% decline seen in July.
While much of the weakness reflected a sharp drop in apartment work, approvals to build new houses also softened, falling by 1.2% to 9,655, down 4.4% from the same month a year earlier.
If the latest New Home Sales report released by Australia’s Housing Industry Association is anything to go by, it looks like there’ll be further declines in home approvals seen in the months ahead.
In August, sales of detached homes fell by 2.9% in after seasonal adjustments, a similar decline to the 3.1% fall reported in July.
They now sit at the lowest level since early 2013.
Across the mainland states, sales slumped by 7.3% and 7.1% respectively in New South Wales and Victoria, the two states where established home prices have fallen the most so far this year.
Along with falling valuations, the decline in sales in these states also reflects less demand from local and foreign investors, the former largely due to tighter lending restrictions on interest-only loans.
“The factors driving this decline are tightening credit conditions, falling house prices and a large volume of additional housing stock steadily flowing into the market,” the HIA said.
In contrast to sharp declines seen in Australia’s most populous states, there were more encouraging signs from the other parts of the country with sales lifting by 6.1%, 3.8% and 0.7% respectively in South Australia, Western Australia and Queensland from a month earlier.
However, those improvements were not enough to offset the sharp falls seen in New South Wales and Victoria, explaining the decline in the national figure.
From the peak in April 2014, new home sales have now fallen by 27.1%, including a 3.6% decline in the three months to August compared to the same period a year earlier.
Given new home sales are a lead indicator for both approvals and starts, Diwa Hopkins, Economist at the HIA, says the August report suggests building activity will continue to weaken into 2019.
“HIA New Home Sales are among a string of housing indicators signalling the national downturn in new home building will continue in 2019,” she says.
“We are forecasting a 10.6% decline in home building in 2019, which would leave new home starts at the still historically high level of 193,600 homes.”
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