Buoyed by a bounce in the multi-residential sector, new home sales in Australia experienced a lift in June for the second consecutive month, the latest report says.
Following an increase of 0.7 per cent in May, the seasonally adjusted number of new homes sold throughout the country rose by a further 2.8 per cent in June, according to the HIA New Home Sales report.
However, the headline increase, which followed two consecutive cuts to interest rates, may potentially create a misleading picture of the state of the housing construction market.
For one thing, the entire increase was due to a spike in multi-residential units – a sector in which volatile figures are highly subject to significant monthly fluctuations.
Furthermore, the increase occurred in a month which preceded substantial changes to new-home owner incentive schemes in New South Wales and Victoria, meaning that the jump in multi-residential sales could partially reflect home buyers getting in prior to June 30.
Moreover, sales volumes of new homes remain at extremely low levels by historic standards; despite last month’s jump, sales of multi-residential units throughout the June quarter were still 36 per cent below 10-year averages. Over the same period, detached home sales, which were down by almost one quarter on the same period last year, were below 10-year averages by 35 per cent.
For this reason, HIA chief economist Harley Dale has greeted the new figures with caution.
Dale says June’s rise in multi-residential sales was ‘encouraging’ but that the comparison of current sales to long term averages provided a ‘concerning update.’
The latest figures come amid industry calls for further tax reform – calls which Dale has repeated.
“Lower interest rates will assist new housing in 2012/13, but the large gap between the cash rate and variable mortgage rates will blunt their positive impact,” Dale says.
“Investment and reform from governments is the key ingredient to lifting the new housing sector substantially above the recessionary levels of 2012. State governments have a crucial role to play, as do local governments, but it is the Federal government that needs to act first and lead by example.”
In terms of states, looking at detached housing only, Western Australia led the way with a 23.5 per cent seasonally adjusted increase, followed by South Australia (up 4.4 per cent) and New South Wales (up two per cent).
By contrast, sales of detached houses dropped by 11 per cent in Victoria and 9.6 per cent in Queensland.
Over the broader June quarter, however, Victoria was the top performer (up 9.8 per cent) as home buyers rushed in prior to the end of the new home building boost, closely followed by Western Australia (up 9.3 per cent).
The HIA cautions, however, that problems with the building act in WA means that the lift in home sales in that state ‘will not translate into construction activity anytime soon.’
Less positively, quarterly sales of new detached houses plummeted 21.1 per cent in Queensland and also fell by 8.3 per cent in South Australia and 6.2 per cent in New South Wales.