In a positive sign for the residential construction industry, the latest data shows that November’s interest rate cut had an immediate impact on new home buying.
On a seasonally adjusted basis, the value of new home sales increased by 6.8% Australia-wide during the month of November, according to the most recent HIA-JELD Wen New Homes Sales Report. Whilst apartment sales plummeted by 17% during the month, this was more than offset by an increase of 9.8% in sales of detached houses.
Given the relationship between sales of new homes and new residential construction starts, data relating to new home sales is seen as an important indicator of likely conditions in residential building going forward.
Housing Industry Association (HIA) chief economist Harley Dale said that the result was ‘healthier but not unexpected’ given that detached house sales were at two year lows as recently as September.
“From this parlous starting position, and with speculation regarding a rate cut mounting and then delivered upon, anything other than some recovery in sales volumes would have been surprising, not to mention highly disturbing” Dale says.
Dale says that given the combination of falling interest rates, a competitive building market and plentiful availability of skilled trades-people, now is the ideal time to purchase new homes.
Despite this, Dale says that with sales volumes running ‘at least 20 percent below what you could conservatively call healthy’, a sustained housing recovery will not take hold without well-targeted government stimulus and ‘a reengagement of the policy reform process’ to reduce barriers to new housing supply.
Increases in sales were recorded in four out of the five mainland states, with New South Wales (up 22.8%) and Victoria (up 11.6%) being the primary beneficiaries. South Australia (down 11.3%) was the only mainland state to record a reduction in sales.
The new figures, however, come on top of less encouraging news for residential construction in the latest Performance of Construction Index (PCI) report from HIA and Australian Industry Group (AIG). That report showed that construction activity in both stand-alone houses and apartments continued to decline in December, with the rate of decline in stand-alone construction increasing significantly. The PCI report also showed continued declines in new orders for both stand-alone housing and apartments, although the report also showed that the pace of these declines had increased markedly.
The new data also comes amid continued evidence of what many in the industry see as an undersupply of housing availability. In its latest State of Supply Report, the federal government’s National Housing Supply Council estimated a shortage of housing supply in 2010-11 to the tune of 215,000 homes throughout Australia, with a medium growth scenario suggesting this will increase to 600,000 homes by 2030.
Source: Design Build Source
