A new survey of home builders across Australia has “confirmed expectations” that the decline in building activity is levelling off, in accordance with a general rise in housing market optimism.
According to the HIA New Home Sales report, new home sales in May were at the highest monthly level in over a year.
“The pickup in May follows lacklustre results throughout the first four months of 2019,” said HIA chief economist, Tim Reardon.
“The resurgence in home sales was evident across all five states covered by the New Home Sales survey, suggesting a broad-based improvement in housing market sentiment around the country.”
The data showed that new home sales were up by 54.2% in NSW, by 34% in WA, by 26% in QLD, by 25.3% in VIC and by 0.9% in SA.
However, while the uptick in new home sales suggests that confidence is returning to the property market, concern has been expressed that the new home supply has far outstripped the demand.
According to CoreLogic head of research Tim Lawless, the higher supply levels are an “impediment” to housing market performance, especially the high-rise unit sectors of Sydney and Melbourne.
“These markets are moving through the peak in an unprecedented number of off the plan unit sales, many of which are receiving valuations at the time of settlement that are lower than the contract price,” he explained.
However, Lawless did agree with Reardon in several ways saying, “Stability within the federal government, along with the removal of uncertainty surrounding changes to negative gearing and capital gains tax discounts, has brought about increased certainty and boosted confidence in the housing market.”
“Aided by the housing downturn, we have also seen an improvement around housing affordability, although dwelling values remain high relative to household incomes in Sydney and Melbourne,” he noted.
Lawless also attributed the housing market showing sings of levelling out to lower mortgage rates, changes to serviceability assessments, and ongoing strong population growth.