New homes sales fell by 5.6 per cent in July, wiping out all the gains recorded over the previous five months. Sales stand at the second lowest level in 11 years.
What does it all mean?
- After a few glimmers of light, the housing construction market is back in the doldrums. Newly-erected homes aren’t selling, reducing the requirement for builders to start work on new projects. The Reserve Bank Governor has expressed surprise about the lack of home construction, but there still aren’t signs of an upturn.
- Census data shows that the number of people occupying our large homes is rising. If the trend to greater housing utilisation continues, residential construction companies and tradespeople will continue to do it tough.What do the figures show?
- According to a survey of Australia’s largest volume builders, the Housing Industry Association reports that new home sales fell by 5.6 per cent in July. While only the first decline in four months, the decline wiped out all the gains over the period. It was also the second lowest monthly total of new homes sales in 11 years, behind the March 2012 result.
- Detached house sales fell by 5.5 per cent while multi-unit sales fell by 6.4 per cent.
- New home sales in July were 11.8 per cent lower than a year ago and have fallen at a double-digit annual rate for the past eight months.
- The HIA note: “In July 2012 the number of seasonally adjusted new detached house sales fell by 6.0 per cent in New South Wales, 4.6 per cent in Victoria, 8.9 per cent in South Australia, and 14.4 per cent in Western Australia. Queensland bucked the trend with a rise of 11.1 per cent in July.”
What is the importance of the economic data?
- The Housing Industry Association releases data on the sales of new homes each month. The HIA collects the data each month from a sample of Australia’s largest 100 home builders. The survey covers around 13 per cent of the home building industry.What are the implications for interest rates and investors?
- Interest rate cuts remain on the agenda. The question is whether it will take more rate cuts to spur housing demand and construction or whether federal, state and territory governments need to take greater action in inducing lenders to lend and developers to start new projects.