New home sales fell by 13.1% in July, highlighting the impact of the recent increases in the cash rate, according to the Housing Industry Association. Source: Timberbiz
The HIA New Home Sales report, a monthly survey of the largest volume home builders in the five largest states, is a leading indicator of future detached home construction.
“The rise in the cost of borrowing will compound the impact of the rapid increase in the cost of building a new home that occurred due to the constraints on global supply chains,” HIA Chief Economist Tim Reardon said.
“The full impact of the rate increases will continue to flow through as an adverse impact on the sale of new homes for at least the next few months.”
Mr Reardon said that the slowdown was consistent with reports from builders over recent months which had seen the number of people visiting display sites and making enquiries slowing since the first increase in the cash rate in May.
“If this decline in sales is sustained, which is expected, then the 1.75% increase in the cash rate so far, will have brought this pandemic building boom to an end,” he said.
“There remains a significant volume of work under construction and approved-but-not-yet-commenced that will provide a buffer for the industry and ensure building activity and demand for skilled trades remains exceptionally strong through the rest of 2022 and into 2023.
“There remains a risk however, that the adverse impact of rising rates on the wider economy will be obscured by this volume of ongoing work and that the RBA goes too far, too soon.”
All of the major states saw a decline in new home sales in July, led by Queensland (-15.5%) and New South Wales (-15.3%), followed by Western Australia (-13.5%), Victoria (-11.1%) and South Australia (-9.7%).
Compared with the same month in 2019 however, most of the states were still up, led by Queensland (+34.0%), Victoria (+17.8%), New South Wales (+12.8%), and Western Australia (+8.2%). South Australia saw the only decline over this period, down by 9.9%.
