New house sales fall in five largest states in Australia

New house sales fell in each of Australia’s five largest states during April and year on year they are down 3.1%, the latest data shows.

New home sales were strong through most of 2017 and the fall back in sales reflects a modest slowdown in demand from both owner occupiers and investors, according to Tim Reardon, principal economist with the Housing Industry Association (HIA).

He added that while the HIA new home sales report, a monthly survey of the largest home builders, shows that the market is well past the peak of activity, overall it remains at elevated levels.

The largest reduction in house sales was in Western Australia with a fall of 11.6%, followed by New South Wales down 8.2%, Queensland down 2.9%, South Australia down 1.7% and Victoria down 0.1%.

‘The most recent concern is that access to finance has become a constraint, as banks exhibit greater caution, due to declining house prices key markets. An increase in collateral requirements for borrowers is an obvious reaction to falling house prices, as banks seek to minimise risky loans,’ said Reardon.

‘The decline in house prices in Sydney and Melbourne also impacts on the new home market as purchases are delayed and investors seek alternative investments. This is in addition to the lending constraints on investors that have been in place for over a year,’ he explained.

He also pointed out that the value of housing loans to investors peaked in August 2017 at $152.7 billion in the preceding 12 months. Since then investor loans have been falling quite steadily to $144.2 billion over the year to March 2018, a fall of 5.6% on last August’s peak.

‘Indications are that the growth in FHB participation has slowed after strong growth since July 2017. FHB participation grew in 2017 due to enhanced state government support and the deceleration of dwelling price growth in key markets like Sydney and Melbourne working to make the home purchase more accessible to FHBs,’ said Reardon.

‘Since January 2018 the FHB share has retreated marginally to 17.4% in March. All of these risks need to be balanced against the strong population growth rate, solid employment growth and improving economic activity that is maintaining demand for new homes at elevated levels,’ he concluded.