New home sales got off to a bad start in the new financial year, with July sales down 5.6% following three consecutive months of modest but rising sales, according to the latest HIA New Home Sales report.
The HIA recorded just over 4,000 new home sales over the month, compared with more than 5,500 in June, based on its monthly survey of Australia’s largest volume builders.
Three years ago monthly new home sales were close to 8,000, peaking at around 8,600 in August 2009 helped by the federal government-funded first-home buyer boost, which ran from October 2008 to December 2009, providing a bonus $7,000 for those first-home buyers who bought a new home, on top of the $7,000 for all first-home buyers.
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Over July the HIA recorded a 5.5% fall in the “persistently weak detached housing segment”, with a 6.4% drop in the more volatile multi-unit market.
Across the major markets, Queensland was the only state to buck the trend, with a seasonally adjusted rise of 11.1% in detached new home sales in July.
New detached house sales fell by 6% in New South Wales, 4.6% in Victoria, 8.9% in South Australia, and 14.4% in Western Australia.
“New home building is the weakest sector of the Australian economy. Despite interest rate cuts in 2011-12, the two updates for this financial year – new home sales and the Australian Industry Group- HIA Performance of Construction Index – both point to deteriorating conditions in July,” says HIA chief economist Dr Harley Dale.
“Now is a good time to build a home. Interest rates are lower, it’s a very competitive market, and there is less pressure on skilled labour availability.
“However, consistently weak consumer (and business) confidence is weighing very heavily on new housing investment, far more so than is the case for retail expenditure,” Dale says.
“Combine that low confidence with very tight credit conditions and excessive taxation, and you have the unpalatable recipe for the recessionary conditions facing new housing.
“Leading indicators suggest this situation will persist well into 2012/13,” says Dale.
More insights into the state of new home building will be revealed when ABS building approval figures for July are released on Thursday.
In June the ABS recorded a 1.1% seasonally adjusted fall in approvals for private sector houses, but with rises in Queensland (5.3%), Western Australia (4.4%) and South Australia (0.4%).