New home sales have dropped to a two-year low during the month of October, according to the Housing Industry Association’s (HIA) monthly survey of Australia’s largest home builders.
“HIA new home sales fell by some 8.5% during October 2016, the lowest volume of sales since July 2014,” HIA senior economist, Shane Garrett
said. “Sales on both sides of the market saw sizeable reductions during October. Detached house sales were down by 8.2% during the month, while multi-unit sales fell by 9.%.”
Garrett said that the drop in new home sales is not unusual, however, in light of the fact that "Australia is coming to the end of its longest and strongest new home building upturn."
HIA had forecasted that there will be a significant reduction in new home building activity over the next few years, which the latest monthly survey has reinforced.
"Even so," Garrett said, "activity is projected to fall to a low point of around 172,000 new dwellings starts during 2018/19, about the same as the average of the past decade.”
The HIA's latest report comes as no surprise, as tighter credit rules and weaker earnings growth begin to take their toll on the construction sector, and a market slowdown becomes inevitable.
In response to a potential collapse in apartment prices as a result of apartment oversupply, last week Treasurer Scott Morrison altered the rules that restrict foreign buyers, now allowing them to buy apartments that have failed to settle. However, the HIA's findings have suggested that developers are being proactive and already cutting production, as reported in the AFR, which may deem the new rule ineffective.
Since topping out in April last year, new home sales have fallen 12.6%, according to the HIA. Detached house sales are down by 15.9% and multi-unit sales are down 19.4% over the period.
During October 2016, detached house sales fell in three of the five mainland states covered by the report, with the largest reduction in sales volumes during the month coming from Victoria (-20.4%). New detached house sales also fell in the struggling market of Western Australia (-5.6%) and New South Wales (-2.8%).
New detached house sales rose by 4.5% in Queensland during October, with a slight increase of 0.8% in South Australia.