Australian new home sales fell heavily in April, adding to a long list of housing market indicators that are weakening at present.
According to Australia’s Housing Industry Association (HIA), sales of detached houses slid 4.2%, leaving the decline over the past year at 3.1%.
The HIA said sales fell in each of Australia’s mainland states, led by declines of 11.6% in Western Australia and 8.2% in New South Wales.
Smaller declines of 2.9%, 1.7% and 0.1% were recorded in Queensland, South Australia and Victoria respectively.
“New home sales were strong through most of 2017 and the fall back in sales reflects a modest slowdown in demand from both owner occupiers and investors,” said Tim Reardon, principal economist at the HIA.
“The market is well past the peak of activity but overall the market remains at elevated levels.”
Reardon said the recent pullback in sales reflected tighter home loan restrictions implemented by Australia’s banking regulator, APRA.
“The most recent concern is that access to finance has become a constraint, as banks exhibit greater caution, due to declining house prices key markets,” he said.
Reardon says housing finance data released by the ABS revealed this has been most acutely felt in the investor segment of the market.
“The value of housing loans to investors peaked in August 2017 at $152.7 billion in the preceding 12 months,” he said.
“Since then investor loans have been falling quite steadily to $144.2 billion over the year to March 2018, representing a reduction of 5.6% on last August’s peak.”
He also said potential buyers in New South Wales and Victoria are also being put off by recent price declines.
Builders surveyed said that after a bump last year as a result of stamp duty discounts introduced by the New South Wales and Victorian state governments, there are signs that first home buyer (FHB) demand is also starting to cool.
“Indications are that the growth in FHB participation has slowed after strong growth since July 2017,” Reardon said.
“FHB participation grew in 2017 due to enhanced state government support and the deceleration of dwelling price growth in key markets like Sydney and Melbourne working to make the home purchase more accessible to FHBs.
“Since January 2018 the FHB share has retreated marginally to 17.4% in March.”
The slowdown could also reflect the impact of falling demand from foreigners looking to invest in Australia’s housing market.
According to Australia’s Foreign Investment Review Board (FIRB), a total of 13,198 residential real estate applications were approved for proposed investment in the 2016/17 financial year, well below the 40,149 approvals granted in the 2015/16 financial year.
New dwellings account for the vast bulk of submissions from offshore buyers.
While sales of detached housing now sit at the lowest level since August last year, whether it remains that way is another question given recent strength in Australia private sector housing approvals.
According to the ABS, private sector housing approvals rose at 10,446 in April, leaving the increase on a year earlier at 11.1%.
However, while approvals continue to lift, home loans to build new homes have weakened in recent months, possibly reflecting tighter lending standards, falling property prices in some parts of the country and fewer approvals entering the construction phase.