New home sales down month on month in Australia

New home sales in Australia fell by 4% month on month in September, with the level of activity down from the April peak by 5.2%, the latest new data shows.

Detached house sales declined in four out of the five the mainland states with only Victoria seeing growth at 3.1%, according to the New Home Sales report from the Housing Industry Association (HIA).

They fell by 19.8% in South Australia, by 8.6% in Western Australia, by 5.9% in Queensland and by 0.5% in New South Wales. In Victoria detached house sales increased by 3.1%.

‘Following the peak level of sales that occurred in April this year, sales activity has trended lower only very modestly. This augers well for actual new home building activity in 2015/2016,’ said HIA economist, Diwa Hopkins.

‘A fresh record level of building activity during this financial year could have been achieved and could have been of strong benefit to the broader domestic economy but increasingly restrictive credit conditions are likely to curtail the boom in new home building,’ she pointed out.

‘The deterioration in credit conditions is likely to weigh more heavily on new home building activity beyond 2015/2016. We have therefore pared back our forecasts for activity over our forecast horizon beyond the end of the current financial year,’ she added.

Meanwhile, separate research shows that offshore investment into Australia's commercial property market shows no signs of abating this year. Foreign investors accounted for 28% of transaction volumes by value in 2014 and already in the first half of 2015 the level is 27%.

The Australian market is remaining attractive to offshore buyers, as commercial real estate assets continue to provide relatively high income returns in global context, according to the report from real estate firm JLL.

It points out that Australian office assets are attractively priced for investors seeking high yielding, stabilised assets in a mature market, comparing well against major cities in Europe, Asia, and America. And even taking into account localised differences such as higher rent free incentive levels in Australia, yield spreads still favour the Australian market.

‘In Australia, yield compression has continued unabated, especially for prime grade assets, across all sectors and many markets. The weight of capital remains significant and the global portfolio tilt toward real estate continues,’ said Simon Storry, JLL's head of International Investments Australia.

While 2014 was a record level of foreign investment into Australia, at the half year mark, 2015 levels are close to the record 28% of transaction volumes recorded in 2014. Storry said that the depreciation of the Australian Dollar has allowed offshore investors to be far more competitive and they seem to have a much greater desire to deploy substantial pools of capital in what they see as an undervalued market globally.