New house sales continue to decline

“Sales of new detached houses declined for the second consecutive month during February 2018, although several key markets experienced growth,” said Shane Garrett, HIA senior economist.

This decline has occurred despite rises in Australia’s two biggest markets of New South Wales and Victoria, as well as South Australia, which saw rises of 11.7 per cent, 4.8 per cent and 10.3 per cent respectively, with Queensland falling by 16.4 per cent and Western Australia falling by 9.9 per cent.

The reporting of this decline follows predictions made at the end of 2017, which predicted new dwelling sales to cool over the course of 2018.

“Tighter restrictions around investor lending and heavier obstacles to foreign investor participation are contributing to the weaker conditions in new dwelling construction,” Mr Garrett said.

In December 2017, Mr Reardon previously said constraints on the economy and investors would push up housing construction as the market cools.

“We do not anticipate that the market will grow in 2018. In fact, we expect that the market will continue to cool as subdued wage pressures, lower economic growth and constraints on investors result in the new building activity transitioning back to more sustainable levels by the end of 2018,” Mr Reardon said.

As new sales cool, prices were expected to follow suit, following a report by HSBC Global Research, which also previously mentioned in December 2017 that the slowdown will be driven by an increase in dwelling supply, tighter regulations and less foreign investors.

“We expect these factors to continue to weigh on housing price growth in the coming quarters and retain our forecast that national housing price growth will slow from the double-digit rates of recent years to 3-6 per cent in 2018,” the report stated.

“[We] do not expect a sharp decline in housing prices and expect only a modest decline in construction activity, as both are likely to be supported by strong population growth and low interest rates.”