Sales of new homes fell by 22.8% in October as the weight of increases in the cash rate slows building activity. 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. Source: Timberbiz
“Sales fell sharply in all regions for October,” HIA chief economist Tim Reardon said.
“Sales of new homes had already fallen 15.8% nationally in the three months to the end of September, due to the increases in the cash rate starting in May 2022.
“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.”
Mr Reardon said that despite the fall in sales over the past four months, there remained a significant volume of home building under way, and many homes still to commence construction. This would ensure that work on the ground remained strong through 2023.
“But it is very clear, even before the October and November increase in the cash rate start to impact on sales, that this building boom is coming to an end,” Mr Reardon said.
“The full effect of the November 2022 increase in the cash rate is not likely to flow through to new home sales fully, until June 2023.
“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.
“If the RBA doesn’t ease the cash rate in 2023, the Government’s goal of building one million homes in five years will be very difficult,” he said.
For the three months to October 2022, compared with the previous three months, new home sales in Queensland were down by 31.9%, Victoria down by 22.8%; New South Wales down by 19.6%; and Western Australia down by 9.1%. South Australia saw the only increase, up by 13.9%.
