In a moderately positive sign for the residential construction industry, sales of new homes throughout Australia edged up in May, albeit with the impact of the May interest rate cut having only a limited effect.
According to the HIA – JELD-WEN New Home Sales report, based on a survey of Australia’s largest home builders by volume, the seasonally adjusted number of new homes sold throughout the country edged up by 0.7% during the month of May.
Registering a jump of 21.1%, multi-unit sales led the way. Sales of detached homes, meanwhile, registered a disappointing 2.0% decline.
Still, as shown in the chart below, overall volumes of new home sales and building approvals remain low by recent historic standards, indicating that new residential building work is coming in very slowly at the moment.
Commenting on the figures, Housing Industry Association Chief Economist Harley Dale says that although cuts to official interest rates have so far done little to spur new residential activity, conditions in the residential construction market are likely to pick up later in the year.
“We expect that through the second half of 2012 the aggregate impact of interest rate cuts in late 2011 and then mid-2012 will at the very least put a floor under new home sales, and other leading housing indicators which also remain very weak” Dale says.
Still, whilst the rise in multi-residential sales was encouraging, Dale says the numbers for detached house sales are disappointing and reinforce the need for further action to stimulate the housing sector.
“Further interest rate reductions are warranted, but rate cuts can’t do all the heavy lifting” Dale says.
“Government investment and reform is required to complement the helping hand that lower borrowing costs should provide new home building in the second half of 2012, and the Federal government should be leading from the front”.
On a state-wide basis, the seasonally adjusted volume of new detached home sales fell in every state except Victoria, which registered a 3.9% increase as the state nears the end of the First Home Bonus on June 30.
Detached house sales (which as stated above were down 2.0% nationwide) fell by 6.3% in Queensland, 5.5% in New South Wales, 4.7% in Western Australia and 1.5% in South Australia.