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New house sales fall in five largest states

“New house sales fell in each of Australia’s five largest states during April 2018, but remain at elevated levels,” said Tim Reardon, HIA’s Principal Economist.

“New house sales for the year to date are now 3.1 per cent lower than they were in the same period in 2017.”

The HIA New Home Sales report – a monthly survey of the largest volume home builders in the five largest states – provides an early indication of trends in the residential building industry.

“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,” added Mr Reardon.

“The market is well past the peak of activity but overall the market remains at elevated levels.

“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.

“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.

“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. This represents a reduction of 5.6 per cent on August 2017’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.

“Since January 2018 the FHB share has retreated marginally to 17.4 per cent in March 2018.

“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,” concluded Mr Reardon.

During April 2018, new house sales declined in all five markets covered by the HIA New Home Sales Report. The largest reduction in house sales occurred in Western Australia (-11.6 per cent) followed by New South Wales (-8.2 per cent), Queensland (-2.9 per cent), South Australia (-1.7 per cent) and Victoria (-0.1 per cent).

Source: HIA