New home sales stabilising at strong level

Colin Brinsden, AAP Economics and Business Correspondent
(Australian Associated Press)

 

New home sales have remained elevated despite the end of the federal government’s HomeBuilder grants program in March, stabilising at their highest level since 2017.

Housing Industry Association economist Angela Lillicrap says this indicates the strong level of home building activity that is underway will be sustained throughout 2022.

“Following a rollercoaster of sales over the past 18 months with the adverse impact of COVID lockdowns and then the HomeBuilder stimulus, sales of new detached homes in the three months to the end of October were consistent with the previous three months,” she said.

“This suggests that the market is finding its new post-COVID equilibrium.”

HIA’s new home sales report, which surveys the largest volume home builders in Australia’s five largest states, showed sales rose 11.1 per cent in October, while declining by a modest 0.2 per cent in the three months to October.

In the three months to October, sales increased in Western Australia by 45.8 per cent when compared to pre-COVID levels in 2019.

Similarly, NSW was up by 42.3 per cent and Queensland was up by 2.1 per cent. Sales declined in South Australia by 1.3 per cent and in Victoria they were down 7.5 per cent over the same period.

“Demand for new homes continues to exceed the capacity that the industry can deliver. This is evident in the volume of work approved but not yet commenced, which is at its highest level in over a decade,” Ms Lillicrap said.

“The ongoing demand for detached home building will continue to create strong employment opportunities throughout 2022 and into 2023.”

Meanwhile, the Commonwealth Bank of Australia’s household spending intentions index showed the home buying component falling 1.4 per cent in October, but remained 12.4 per cent higher over the year.

The decline comes as the Australian Prudential Regulation Authority has lifted the serviceability buffer on loan applications from 2.5 per cent to three per cent as it tries to slow the pace of home lending.

“It’s not surprising there is a bit of a moderation in the pace of the home buying index,” CBA chief economist Stephen Halmarick told a webinar launching its revamped monthly spending intentions index on Tuesday.

“Clearly if interest rates rose faster or APRA did more … then that would have an impact on home lending.”

CBA expects house prices to rise seven per cent in 2022, having already reached its forecast of 20 per cent growth for 2021.