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Category: Business, Economics and Finance / Economic Trends / Housing Industry

Industry body warns of further falls after new home sales slump

Monday, 29 Aug 2016 11:39:19 | Rebecca Hyam Rebecca Hyan

The HIA says the trend decline in new home sales is accelerating. (ABC News: Nic MacBean)

A much bigger than expected slump in new home sales in July has prompted the peak industry body to warn of further falls in the next two years.

The Housing Industry Association's monthly New Home Sales Report revealed sales plunged by 9.7 per cent in July, in seasonally adjusted terms.

It followed an 8.2 per cent seasonally adjusted increase in June.

The HIA noted the overall trend decline in new home sales was accelerating, indicating a relatively sharp drop in new dwelling commencements from 2017.

The organisation's chief economist, Harley Dale, said further sharp declines in new home construction and sales would be likely in 2017 and 2018.

"New home construction has been the kingmaker of the Australian economy, but the cycle has peaked," he said.

"As we move through 2017 and 2018, we are going to see considerably lower levels of building activity than we're currently seeing.

"That's coming from a record level of building activity in 2015 and 2016."

The HIA said most leading indicators of housing activity peaked in the first half of last year, and apart from the July new home sales result, things have been falling at quite a modest rate.

"This is the longest new home building cycle in Australia's history and it's also the largest," Mr Dale said.

"We've never gone four plus years constructing an increasing number of new homes, and we're building to a peak this time, that's around 24 per cent higher than the previous record peak, which was achieved back in 1994."

The Housing Industry Association said interest rate cuts were not boosting the market as much as in previous years.

"Interest rates have been so low for so long, I think frankly they've lost a bit of their bite, when it comes to stimulating housing activity," Mr Dale said.

"They're always welcome, but the bang for the buck from lower interest rates for housing ended some time ago, and the outgoing Reserve Bank governor, Glenn Stevens has intimated as much in some of the comments he's made in recent weeks."

AustraliaPlus


 

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