The Housing Industry Association New Home Sales Report, a survey of Australia's largest volume builders, shows that monthly sales are back to a level not seen in over a year.
The headline result was driven by a 6.7% increase in detached house sales, which was experienced across all states covered by the survey except Queensland. In contrast, multi-unit sales fell by 9.4%.
Detached house sales increased by 9.1% in Victoria, by 9% in Western Australia, by 8.1% in New South Wales, and by 2.7% in South Australia. Detached house sales fell by 1.8% in Queensland.
‘Overall, recent developments in new home sales are encouraging. In particular, the important detached house segment of the market continues to climb out recent record lows, and this improvement has largely been broad-based across the states,’ said HIA senior economist Shane Garrett.
‘While multi-unit sales have softened over recent months, the gains made over the course of 2012 have not been eroded. A broader look at the situation shows that the volume of sales in the three months to April this year is still 51.7 higher than trough experienced a year earlier,’ he explained.
‘We do, however, need to be considering the longer term prospects of a recovery in residential construction beyond 2013. The economy is in a transition away from growth driven by mining and related investment and the consensus aspiration is for residential dwelling investment to fill the ensuing hold. While we share this aspiration, we don’t have strong evidence that this will actually be achieved,’ he pointed out.
He also said that there are still major obstacles to recent improvements in residential construction developing into a sustained recovery. ‘Households remain cautious and are still using lower interest rates to hasten debt repayment rather than engage in spending. On the other side of the housing ledger, home builders and residential developers are facing tight credit conditions, hampering the number of projects that proceed to sale and building commencement,’ he explained.
‘For a recovery to be of the duration and magnitude required not only by the economy, but by Australia’s housing needs, governments of all levels, led by the federal government, need to take decisive policy action to address these obstacles,’ he added.
Meanwhile, preliminary figures released by the Australian Bureau of Statistics indicate that the recovery in residential construction activity faltered slightly in the first three months of 2013.
Nationally, residential construction volumes declined by 1% compared with the previous quarter. Western Australia was the only state where growth occurred in the quarter, with residential construction increasing by 10.1%. This was comprised of a 0.5% fall in new dwelling volumes as well as a 4% fall in renovation volumes during the quarter.
In all other states, the volume of residential building fell. The falls occurred in Tasmania which was down 11%, the Australian Capital Territory down 6.8%, Victoria down 2.8% and Queensland down 2.6%. New South Wales saw a smaller decline of 1.7% and in South Australia activity was flat.
‘The slight fall in building activity in the first quarter of 2013 is at odds with the generally improving conditions over previous quarters. In spite of these disappointing figures, we continue to believe that housing activity is in recovery mode. The fact that residential activity has faltered shows that there is no room for complacency. However, this is a delicate recovery and policy settings need to be as supportive as possible to ensure that it is sustained,’ said Garrett.
He pointed out that when compared with 12 months ago, the picture is a little more encouraging. ‘Residential building activity rose by 2.1% with particularly strong growth of 4.1% in work done on new dwellings. Renovations activity continued to deteriorate with an annual decline of 8.9%,’ he said.
He also said that the general recovery in new home building activity shows that the succession of Royal Bank of Australia rate cuts is having positive effects and that further reductions will help safeguard the revival.
‘On the other hand, the dismal performance of renovations places the banks very firmly in the dock. Evidence on the ground tells us that lenders are not forthcoming when it comes to home equity release financing. This is really hurting renovations activity,’ added Garrett.
