New home sales increased in Australia in August 2017 but this sector of the property market is still trending downwards and building activity is also slowing, according to the latest analysis.
Overall new home sales increased by 9.1% helped by a very strong market in the States of Victoria and South Australia, but over the year sales have continued to slow, according to the monthly survey of home builders by the Housing Industry Association (HIA).
HIA’s principal economist, Tim Reardon, pointed out that the overall forecast is still for a slowdown in building activity through until 2018/2019.
‘The increase in sales in August offsets larger declines in sales in recent months, but it is not sufficient to reverse the decline in sales that is evident since early 2016,’ he explained.
He also pointed out that results in July and August have been affected by Government interventions in New South Wales and Victoria which have seen first time buyers returning to the new home market.
‘Victoria has seen record numbers of new building approvals and new home sales are continuing to drive even higher. Strong population growth and employment growth, fortified with enhanced first home buyer incentives, is prolonging the boom in building activity,’ Reardon added.
A breakdown of the figures shows that in the three months to August 2017 new home sales increase by 15.7% in Victoria and by 9.2% in South Australia but fell by 17.4% in New South Wales, by 15.4% in Western Australia and by 7.3% in Queensland.
A separate set of figures show that there is also a slowdown in building activity and the HIA said that this could lead to worsening affordability. Housing finance data from the Australian Bureau of Statistics reveal that new housing starts were down 8% year on year in August and loans for new homes down 1.2%.
Shane Garrett, HIA senior housing economist, pointed out that the construction of new dwellings has been in decline for more than a year and it is the apartment side of the market that is leading the downturn.
‘Apartment building has been impacted by a number of foreign investor penalties that have spread across the states. The housing finance data show that APRA restrictions on domestic investors are starting to bite. Housing investor lending was down 0.4% over the three months to August 2017,’ he said.
‘Our worry is that rental markets could end up being starved of the supply they need, resulting in accommodation shortages locally. Activity in the sector remains high despite the slowdown but governments should be cautious in considering further constraints on the sector,’ he explained.
The figures show that new home starts were down 0.3% in New South Wales, down 5.4% in Victoria, down 16.5% in Queensland, down 21.4$ in Western Australia, down 28.3% in the Northern Territory and down 22.4% in ACT. But they increased by 3.8% in Victoria and increased by 7.6% in Tasmania.
