New homes market cooled in Australia in 2017
The new homes market in Australia cooled in 2017 but the housing sector is still seeing relatively healthy levels of activity, according to the latest analysis.
New home sales were 6% lower in the 12 months to November 2017 than in the same period in 2016 and building approvals were down by 2.1%, the report from the Housing Industry Association (HIA) shows.
HIA’s principal economist, Tim Reardon, explained that this was a smaller downturn than anticipated and bodes well in terms of the likelihood of a modest and orderly reduction in new house building.
But he pointed out that activity is not consistent across all states. ‘In the middle of the year it looked like Western Australia had turned the corner after a significant decline in activity over three years, but the new financial year brought even lower results as more restrictive first ‘home buyer policies were implemented,’ said Reardon.
‘At the other end of the market in Victoria, the expected slowdown in building activity has not yet materialised. Sales of new houses increased by 6.3% for the 12 months to November 2017 and approvals rose by a further 8.7% in the three months to November compared with the same period in 2016,’ he added.
The HIA does not anticipate that the market will grow in 2018. ‘In fact, we expect that the market will continue to cool as subdued wage pressures, lower economic growth and constraints on investors result in the new building activity transitioning back to more sustainable levels by the end of 2018,’ Reardon concluded.
Meanwhile separate data from the Australian Bureau of Statistics (ABS) shows that first time buyers accounted for 17.6% of owner occupier housing loans in October, the highest level since November 2012.
Shane Garrett, HIA’s senior economist, explained that packages of support for first time buyers in several state budgets over the past year have been the catalyst for a rise in numbers.
‘Interventions by the New South Wales and Victoria governments have been particularly beneficial. We urge other states to give serious consideration to similar measures next year. With the interest rate outlook looking much more favourable for 2018, the window of opportunity for first time buyers is now wider,’ he said.
First time buyers made up the biggest part of the market in the Northern Territory at 24.8%, followed by Western Australia at 24.6%, the Australian Capital Territory at 20.1% and Queensland at 19.7%.
South Australia has the lowest number of first time buyers at just 13% while they made up just 13.3% of the market in Tasmania. They made up 19% of the market in Victoria and 13.7% in New South Wales market but Garrett pointed out that in both these states, the share has increased significantly as a result of a more favourable stamp duty regime and enhanced grants.