New Home Sales On A Downward Slide: HIA

The findings from the latest HIA New Home Sales Report suggest Australia's building and housing industry will undergo a down cycle in 2017 and possibly beyond.

HIA's report indicates an overall trend of decline in new home sales which seems to be accelerating, according to a monthly survey in July this year which revealed a fall of almost 10 per cent for home sales following an increase of 8.2 per cent in June.

HIA Chief Economist Dr Harley Dale sees this trend as signalling a relatively sharp drop in new dwelling commencements from 2017.

“The short term outlook for healthy levels of new home construction remains intact – calendar year 2016 will be a record year for new dwelling commencements, but the situation could look very different from next year,” he commented.

“New home construction has been the kingmaker of the Australia economy, but the cycle has peaked."“In all likelihood we will experience sharper falls in new home construction in both 2017 and 2018," he said.

In July 2016 detached house sales fell in all five mainland states, after rising everywhere in June. Sales dropped by 12.6 per cent in South Australia and were down by 8.7 per cent in Queensland, 8.2 per cent in Western Australia, 6.2 per cent in NSW, and 6.0 per cent in Victoria.

Despite this trend and impending downturn, Dr Dale wants to reassure there is no reason to sensationalise these negative findings as the trajectory of the down cycle unfolds.

"The magnitude of decline in new home construction in coming years will of course be exaggerated by where we are coming from – record levels of medium/high density construction and historically healthy levels of detached/semi-detached dwelling construction.”

"We would do well to remember that this down cycle is following a record high that is some 24 per cent higher than the previous (1994) peak and that there is an unprecedented degree of uncertainty this time around as to how the next few years of new home building unfold,” he said.