Australian new home sales fell last month, but not by much

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After two months of solid growth, Australian new home sales fell modestly in January.

According to Australia’s Housing Industry Association (HIA), new home sales fell by 2.2% last month, led by a small pullback in both unattached and multi dwellings.

Sales of the former fell by 1.5%, outpaced by a larger drop in multi dwellings — largely units — of 4.3%.

Source: HIA

“Detached house sales fell by a very modest 1.1% over the three months to January 2017 to be down by 4.0% when compared to the same period 12 months previously,” said Harley Dale, chief economist at the HIA.

By state, detached housing sales rose by 12.1% in Western Australia in January, masking declines of 6.8%, 4.1%, 2% and 1.4% in New South Wales, Victoria, Queensland and South Australia.

While sales of multi-units dropped by 4.3% in January, that was merely a reversal of the strong 6.4% lift recorded in December 2016.

Reflective of strong demand for high-density housing recently — corresponding with a noticeable lift in investor housing finance in the second half of last year — Dale said sales in this category increased by 4.8% over the past three months, leaving sales volumes up 9.0% on the comparable period a year earlier.

“This weaker update does follow a relatively decent run home for new home sales in late 2016,” said Dale.

And while sales fell in January, he says that the near-term outlook for housing starts remains robust.

“HIA’s latest forecasts for new dwelling commencements will be released on Thursday and they will paint a healthy short term picture for residential construction,” he says.

“There is nothing to be seen in this latest update for new home sales or from any other recent leading indicator results to deter us from this outlook”.

The HIA’s updated forecasts will correspond with the release of Australian building approvals data for January from the ABS on Thursday, March 2.

In December, total approvals slid by 1.2% to 17,327 in seasonally adjusted terms, down 11.4% on the levels of a year earlier, according to the ABS.

Private housing approvals led the decline, slipping by 1.6% to 9,197. That was down 9.6% on the levels reported in December 2015.

Helping to offset that fall, private-sector dwelling approvals ex-houses — namely units — rose for a second consecutive month, inching up by 0.9% to 8,014, leaving the decline on a year earlier at 13%.

As a result of an expected downturn in dwelling approvals, particularly for units, the HIA said in November that “new residential building will slow for the next two years” before bottoming out at what “will still be a historically healthy level of activity”.

“Total new commencements are forecast to decline 3.1%, 18.5% and 5.1% over the period 2016/17 – 2018/19, which would take commencements to a trough of 172,242, which is the average for the last ten years,” the group said.

Much of that decline would be due to a decline in multi-unit commencements, the HIA said, forecasting a drop of 40% on the 117,000 level seen in 2016.

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