New home sales lift in November

AFTER a string of weak months, new home sales finished the year on a slightly more positive note with the HIA New Home Sales Report showing detached Victorian house sales increased by 7.3 per cent in November.

HIA Senior Economist Geordan Murray said that although these results are pleasing, new home sales are still 12.2 per cent lower than last year.

“Despite the monthly rise, the overall level of sales in November is well below the level 12 months previously and also below what had otherwise been typical for most of the period since 2014,” Mr Murray said.

“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.

“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.

“The credit squeeze first started to bite the investor side of the market in 2017 and more recently the effect of this squeeze has spilled over into the owner-occupier market.

“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.

“With the Royal Commission scheduled to release recommendations early next year we see a risk that the credit squeeze may drag on into 2019 with the new home market already looking vulnerable, policy makers will need to proceed cautiously when responding to the Commission’s recommendations,” Mr Murray concluded.

The monthly rise was geographically widespread: sales increased in Victoria (7.3 per cent); Queensland (2.1 per cent); South Australia (7.4 per cent); and Western Australia (2.2 per cent).

New South Wales was the lone state where sales declined during the month (down by 3.3 per cent).