This article is from the Australian Property Journal archive
SALES of new homes saw a 22.8% dip in October, as building activity continues to slow across the country.
According to the HIA New Home Sales Report for October, new home sales fell sharply across all regions, which was largely attributed to the rising cash rate.
Tim Reardon, chief economist at HIA, cited the RBA increases beginning in May this year as causing the 15.8% drop in new home sales in the September quarter.
“The increase in interest rates is compounding the rise in the cost of new home construction and further reducing the capacity of borrowers to finance the build of a new home,” said Reardon.
“Despite the fall in sales over the past four months, there remains a significant volume of home building under way, and many homes still to commence construction. This will ensure that work on the ground remains strong through 2023.”
Reardon added that even ahead of the last two cash rate rises, that the end of the building boom is clear.
“The consequence of the fastest increase in the cash rate in almost 30 years will see detached home building activity slow to its lowest level in a decade by 2024,” said Reardon.
However, rising construction materials and labour costs and their impacts on housing pre-date the May rise.
With these factors dragging down new dwelling approvals by 19.2% in March and 2.4% in April. As the building boom and ongoing international supply chain disruptions placed an overwhelming demand on materials and local land and labour.
Over the three months to October, compared to the three months prior, Queensland saw the greatest negative change in new home sales at 31.9%. Victoria followed at 22.8%, NSW at 19.6% and Western Australia at 9.1%.
South Australia was the only state to record an increase over the period, seeing a 13.9% rise in new home sales.
“If the RBA doesn’t ease the cash rate in 2023, the Government’s goal of building 1 million homes in five years will be very difficult,” concluded Reardon.
