Will New Home Sales take a new year dip?

The Housing Industry Association (HIA) New Home Sales Report to July 2016, which is based on a survey of Australia’s largest volume builders, suggests new commencements in 2016/17 will slow significantly.

HIA-New-Home-July-2016“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,” commented HIA Chief Economist, Dr Harley Dale.

“The monthly HIA survey of Australia’s largest volume builders reveals that total seasonally adjusted new home sales fell by 9.7 per cent in July 2016 following an increase of 8.2 per cent in June. The overall trend decline in new home sales is accelerating, signalling a relatively sharp drop (from a record high) in new dwelling commencements from 2017.”

“New home construction has been the kingmaker of the Australia economy, but the cycle has peaked,” noted Harley Dale.

“In all likelihood we will experience sharper falls in new home construction in both 2017 and 2018. 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.”

“There will no doubt be a tendency to sensationalise any negative results for new housing as the trajectory of the down cycle unfolds. 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,” concluded Harley Dale.

In the month of 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.

 

Author: Martin North

Martin North is the Principal of Digital Finance Analytics

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