New apartment sales in Australia boomed before Christmas

Apartments for sale in Sydney. William West/AFP/Getty Images

Add this to your list of signs Australia’s property market remains as strong as ever.

After surging 6.1% in November, new home sales across the country continued to lift in December, according to data released by the Australian Housing Industry Association on Thursday.

After seasonal adjustments, sales increased by 0.2%, led by booming demand for apartments.

The group said apartment sales surged by 6.4%, offsetting a drop of 1.6% in detached housing sales.

Over the December quarter, sales of detached houses fell 2.3%, while those for apartments rose 3.2%.

Source: HIA

The increased demand for apartments coincided with strengthening demand for investor housing finance in the preceding months, based on figures released by both the ABS and RBA in recent weeks.

Apartments are typically favoured by investors.

Reflecting booming construction activity in New South Wales and Victoria, along with strong house price gains, the HIA said sales of detached housing in those states rose by 2.4% and 5.8% respectively, offsetting declines, sharp in some instances, in Australia’s other mainland states.

“The monthly fall in detached house sales was 9.1% in Queensland, 1.9% in South Australia and 9.0% in Western Australia,” the group said.

Harvey Dale, chief economist at the HIA, said the December report highlighted “the large differences in new home building conditions between the five mainland states”, with strength in southeastern state offsetting patchy conditions elsewhere.

Despite the back-to-back monthly increases — a strong finish to the year — Dale says both sales and new housing starts will likely decline in 2017, albeit at a modest pace.

“The overall profile for both HIA new home sales and ABS building approvals is consistent with the first stage of the down cycle in new home commencements being a mild one,” he says. “We expect this down cycle to begin in 2017.”

Markets will get further information on the scale of the decline, presuming that Dale is correct, when the ABS releases Australia’s December building approvals report on Thursday, March 2.

In trend terms, approval numbers moderated in 2016, led by high-density apartments.

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