- New home sales fell across Australia in July, according to the HIA.
- Total sales have fallen 6.1% so far this year compared to the same period in 2017.
- The HIA says a strong pipeline of new apartments, falling prices, slower population growth and tighter lending standards have all contributed to the slowdown. It expects that trend will continue.
Australian new home sales fell to fresh multi-year lows in July with declines reported in all of the mainland states.
According to the Australian Housing Industry Association (HIA), sales of detached houses slumped 3.1% in seasonally adjusted terms, leaving them at the lowest level since early 2013.
Declines were recorded each of Australia’s mainland states, led by a steep 5.1% drop in Victoria. It was the fifth consecutive month that sales had fallen.
“The slowdown in Melbourne home sales that started in March is showing no signs of abating,” the HIA said. “This update is consistent with our view that the record boom in Melbourne’s housing market peaked in the first quarter of 2018.”
Sales in New South Wales, Australia’s most populous state, also declined by 2%, leaving total volumes down 11.2% over the past three months compared to sales levels seen between February to April.
“This is a relatively rapid slowdown in sales that is being experienced predominantly in the growth corridors of Sydney,” the group said.
“The high volume of new apartments in metropolitan cities are competing for first home buyers and resulting in a slowdown in new detached home sales.”
Across the remaining mainland states, sales fell by 2.7% in Western Australia, 1.8% in South Australia and 1.2% in Queensland, completing a clean sweep of declines across the nation, something that has been seen with increasing frequency this year.
Reflective of recent broad-based weakness, the HIA said total sales volumes nationally have fallen 6.1% so far in 2018 compared to the same period a year ago, a trend the group expects will continue.
“With Victorian new home sales now showing signs of weakness we expect the national trend of declining sales will continue throughout 2018,” it said.
“Building approvals data, which is slow to respond to changes in market conditions, was released by the ABS yesterday and it also shows that approvals have fallen in recent months, consistent with the evidence provided by new home sales data this year.”
According to the ABS, total dwelling approvals slumped by 5.2% in July in seasonally adjusted terms, leaving the decline on a year earlier at 5.6%.
Approvals to build private sector houses fell 2.8% over the year, outpaced by a 6.2% decline in private non-housing dwelling approvals, largely measuring units.
Even with the decline in the latter, analysis from CoreLogic suggests the number of units in Australia could increase by close to 10% over the next two years, the vast majority in New South Wales and Victoria.
Along with a strong pipeline of new apartment supply, especially in New South Wales and Victoria, the HIA said tougher lending restrictions, slower population growth and falling prices were other factors that have contributed to the sales slowdown.
“The market for new home sales across the country is cooling for a number of reasons including a slowdown in inward migration since July 2017, constraints on investor finance imposed by state and federal governments and falling house prices,” it said.
“Finance has become increasingly difficult to access for home purchasers. Restrictions on lending to investors and rising borrowing costs have seen credit growth squeezed.
“Falling house prices in metropolitan areas have also contributed to banks tightening their lending conditions which have further constrained the availability of finance.”
And with Westpac Bank joining other smaller lenders in announcing out-of-cycle mortgage rate increases this week, paving the way for other major banks to follow suit, the HIA says this could exacerbate the slide in new home sales in the period ahead.
“An increase in interest rates charged by banks, which had been anticipated, will accelerate the slowdown in sales and ultimately new home building activity,” it says.
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