New home building in Australia set to keep rising into 2019, but sales are cooling

The number of new home starts in Australia increased by 3.3% in the 2017/2018 financial year to reach well over 200,000, the latest official figures show.

The data from the Australian Bureau of Statistics (ABS) shows that there were 228,480 new home starts compared with the previous financial year and according to the Housing Industry Association (HIA) this level of activity will support the residential sector into 2019.

However, HIA economist Diwa Hopkins warned that the home building cycle is cooling. She pointed to a breakdown of the figures revealing that total housing starts fell by 5.9% in the second quarter of 2018 quarter while detached house starts declined by 3.8% and multi-unit starts fell by 8.2%.

‘Tightening credit conditions, falling home prices in the major markets and fewer people now entering the country have been in play for at least 12 months now and this is now taking effect in bricks and mortar construction activity,’ she explained.

A breakdown of the figures show that housing starts increased by 29.4% in Tasmania, by 19.4% in South Australia, by 18.9% in Victoria and by 4.1% in the Australian Capital Territory. They fell by 8.7% in Western Australia, by 8.6% in the Northern Territory, by 6.3% in Queensland and by 4.3% in New South Wales.

Hopkins also pointed out that the latest HIA data shows that new home sales are signalling that the national downturn in new home building will continue in 2019. The HIA is forecasting a 10.6% decline in home building in 2019 but they are still likely to be at historically high levels.

‘Current measures of the various housing market indicators are still healthy relative to historical averages given the record highs from which they are descending. The pace of the declines so far have also been relatively modest,’ said Hopkins.

‘For new detached house sales, while the latest level is 27.1% lower than the April 2014 peak, this translates into a very modest average rate of decline during the intervening period of just 0.5% per month,’ she explained.

She added that there are regional differences. Detached house sales in August increased by 6.1% in South Australia and by 3.8% in Western Australia but by just 0.7% in Queensland and fell by 7.3% in New South Wales and by 7.1% in Victoria.