- Australian new home sales plunged by 6.7% in December. They now sit at the lowest level since late 2012.
- In the December quarter, sales nationwide slumped by 14.9% compared to the same period a year earlier.
- Sales in Queensland, NSW and Victoria — Australia’s most populous states — slumped by 26.5%, 18.8% and 10.9% respectively over the year.
- Australian housing indicators are weakening substantially, leading to increasing chatter about the prospect of RBA rate cuts.
Australian new home sales plummeted in December, falling to the lowest level since late 2012.
According to Australia’s Housing Industry Association (HIA), sales of detached dwellings fell 6.7% in December in seasonally adjusted terms. That left sales during the quarter down 14.9% compared to the same period a year earlier.
The December survey captured responses from 19% of Australia’s largest home builders. It does not include sales volumes for units.
Across the country, sales fell in all mainland states except for New South Wales over the month, led by a substantial 11.8% fall in Victoria. Sales in Queensland, South Australia and Western Australia also fell by 9.2%, 4% and 9% respectively.
Sales in New South Wales jumped by 10%, albeit after hitting multi-year lows in November.
Compared to the December quarter of 2017, sales fell in all states and territories, ranging from 26.5% in Queensland to 0.3% in South Australia. Sandwiched in between, sales in New South Wales, Victoria and Western Australia slumped 18.8%, 10.9% and 7.9% respectively over this period.
“The slowdown in sales that occurred throughout 2018 shows that the pipeline of new work coming though during 2019 is set to be considerably weaker than we’ve seen in recent years. Home building activity on the ground is set to decline as the year progresses,” said Geordan Murray, Senior Economist at the HIA.
“It will be important to watch the trajectory of new home sales during the first half of 2019. This will give us a clear indication of how the contractionary phase of the home building cycle will play out in the second half of 2019 and into 2020.”
The decline in sales over the past year mirrors similar weakness in a variety of Australian housing construction indicators.
According to the ABS, private sector approvals to build new houses fell 6.4% in the year to November last year.
The Australian Industry Group’s Performance of Construction Index (PCI) also painted a worrying picture on residential construction activity in late 2018, revealing that activity levels for the housing construction sector deteriorated at the fastest pace in over six years in December.
New orders — in line with building approvals and new home sales — also fell from a month earlier.
The steep declines in all of these indicators primarily reflect the impact of tighter lending standards, resulting in difficulties and delays for borrowers to secure funding to buy or build new and existing dwellings.
“While declining home prices in Sydney and Melbourne have made home buyers in these markets far more cautious, the ongoing challenges accessing finance that face many would-be home buyers across the rest of the country continue weigh on sales,” Murray said.
With many expecting price falls to continue for some time yet, particularly in Sydney and Melbourne, that may potentially see some prospective buyers hold off buying new or existing property in anticipation of even cheaper prices.
In the latest Westpac-MI Australian consumer sentiment survey for January, pessimism towards the outlook for prices slumped to the lowest level since the question was first asked back in 2009.
With Australia’s construction sector a significant part of the Australian economy, and with housing the largest store of wealth for the majority of Australian households, financial markets and an increasing number of economists are now favouring that the RBA will have to cut official interest rates in the year ahead.
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