Sales of new homes across Australia fell by a further 7.2% in March compared with the previous month as the rise in the cash rate over the past year continues to impede sales, according to HIA Senior Economist Tom Devitt. 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 latest decline leaves sales in the first three months of the year down by 45.9% compared to the same quarter last year,” Mr Devitt said.
“Compounding the decline in sales is the rise in projects being cancelled.
“The cancellation rate increased in March to 30.5 per cent. This means for every three new building contracts that are signed, one sale from a previous month is cancelled. Many builders have reported ‘negative sales’ over recent months. The last time the rate was near this high was the start of the pandemic,” he said.
Mr Devitt said that the RBA’s rate increases last year, and this year would continue to hold down new sales and cause further cancellations as finance becomes unobtainable for an increasing number of buyers.
The significant increase in the cost of land and construction across all jurisdictions over the past two years was compounding the impact of higher interest rates.
The additional costs of compliance with the National Construction Code, that come into effect this year, would further increase the cost of new home construction and dampen demand further.
“The combination of low sales volumes and rising cancellations of existing projects will hollow out the pipeline of building work over the coming months,” Mr Devitt said.
The largest declines in sales in March compared with the previous month were seen in Victoria (-23.4%) and South Australia (-22.4%), followed by Queensland (-2.2%), while increases were seen in New South Wales (+1.7%) and Western Australia (+22.5%).
Over the past year, New South Wales has driven the declines, with sales in the first three months of 2023 down by 75.9% on the same quarter last year. This was followed by Queensland (-54.3%), Victoria (-43.4%) and South Australia (-13.7%). Western Australia was the only large state to see an increase over the last year, up by 1.0%.
