New house sales slump to 18-year low in September: HIA
The sale of detached homes hit a 18-year low in September, according to the latest HIA survey of Australia's 100 largest volume builders.
New home sales of around 5,200 in September were 17.3% lower than a year ago and have fallen at a double-digit annual rate for the past 10 months, notes CommSec chief economist Craig James.
Sales fell 3.7% in September, reflecting a fall of 3.5% in the persistently weak detached housing segment and a 4.2% decline in the more volatile multi-unit market.
The number of seasonally adjusted new detached house sales fell by 1.6% in New South Wales, 6.7% in Victoria, and 3.5% in Queensland, but increased by 2.8% in South Australia and were up by 3.1% in Western Australia.
The drop in NSW new home sales may partly reflect first-home buyers waiting for the new $15,000 grant available for those building or buying a new home that only kicked-in on October 1.
A similar $15,000 grant was available for Queenslanders first-home buyers mid-way through September.
Commenting on the latest figures, James says interest rates have fallen sharply over the past year but there has been a “decidedly muted response by the new home market”.
“Australia’s population is growing, driven by migration, while housing affordability is the best in a decade and the rental market continues to tighten.
“But despite an apparent increase in the underlying demand for homes, new home construction is mired at 15-year lows.
“So what gives? Well, in large part it is the worldwide trend for “Emerging adults” (largely Generation Y) to stay home with their parents for a longer period rather than moving out with friends or getting married.
“It is estimated that 70% of 18- to 30-year-olds in Italy still live at home, and while the trend is happening also in Australia, there are no formal estimates.
James says state governments are “actively attempting to lift construction via grants and stamp duty concessions directed to new home purchase or construction.
“But to date, the attempts aren’t showing up in the data.”
James says building-dependent companies will continue to experience challenging conditions over the next six months and expects the RBA to cut the cash rate on November 6, Melbourne Cup Day.
HIA chief economist Dr Harley Dale says the persistent weakness in new home sales in 2012 “reflects another factor conspicuous in its persistence this year – a dire lack of confidence towards housing”.
“Interest rates have come down since November 2011 and there is a recognition that the home-buying environment has improved in 2012. However, households remain reticent to actually make a decision to buy. This situation is especially evident in the new home building sector where excessive taxation instills a bias against new housing relative to existing property,” says Dale.
“Interest rate cuts should help foster a recovery in new home sales in the December 2012 quarter, along with new home incentives for first time buyers in three states and a nascent recovery gathering legs in Western Australia.
“The Reserve Bank of Australia needs to play its part by cutting rates again next Tuesday – a renewed easing of rates in October that is not followed up could add to household uncertainty and, perversely, further damage confidence.”