‘Pleasing’ year-end with new home sales

In the major capital cities, new sales rose for the month the most in South Australia by 7.4 per cent. This was followed by Victoria with 7.3 per cent, Western Australia at 2.2 per cent and Queensland at 2.1 per cent. NSW was the only major capital city to record a new sales decline, dropping 3.3 per cent.

“After a string of weak months, it is pleasing to see new home sales finishing the year on a slightly more positive note,” said Geordan Murray, senior economist at the HIA.

“The HIA New Home Sales Report shows detached house sales increased by 3.6 per cent in November this year, but are still 12.2 per cent lower than last year.”

However, overall sales during November were lower than this time last year, as well as below the established norm since 2014.

“Given the softening of the Sydney and Melbourne housing markets and the fact that the tight credit environment remains an issue for borrowers, we are not confident that the lift in sales in November marks the end of the downward trend seen throughout 2018,” Mr Murray said.

“The tighter lending environment came about as banks adjusted to the more restrictive lending practices demanded by APRA and also responded to the heightened scrutiny stemming from the Hayne royal commission.

“Tighter credit conditions facing owner-occupier borrowers are now weighing on the detached house building market, illustrated clearly by the reduced levels of new home sales and building approvals.”

As the royal commission is due to release their recommendations in February 2019, Mr Murray and the HIA expect the current credit squeeze continuing through to 2019.

“With the new home market already looking vulnerable, policy makers will need to proceed cautiously when responding to the commission’s recommendations,” concluded Mr Murray.