New home sales slump under weight of RBA cash rate
According to the HIA New Home Sales report, the sale of new homes has crashed by more then twenty-per cent last month.
The report is a monthly survey of the largest volume home builders in the five largest states and an indicator of future detached home construction.
“Sales of new homes fell by 22.8 per cent in October as the weight of increases in the cash rate slows building activity,” said HIA chief economist Tim Reardon.
“Sales fell sharply in all regions for October.
The Reserve Bank had racked up six months of continuous interest rate rises in an attempt to slow inflation in the economy as the national emerged from the COVID-19 pandemic.
“Sales of new homes had already fallen 15.8 per cent nationally in the three months to the end of September, due to the increases in the cash rate starting in May,” Mr Reardon said.
“The increase in interest rates is compounding the rise in the cost of new home construction and further reducing the capacity of borrowers to finance the build of a new home.”
However it’s not completely dire for the construction sector, with the pre-interest rate rise pipeline of work still proving opportunities for builders.
“Despite the fall in sales over the past four months, there remains a significant volume of home building under way, and many homes still to commence construction. This will ensure that work on the ground remains strong through 2023,” Mr Reardon said
“But it is very clear, even before the October and November increase in the cash rate start to impact on sales, that this building boom is coming to an end.
“The full effect of the November 2022 increase in the cash rate is not likely to flow through to new home sales fully, until June 2023.
“The consequence of the fastest increase in the cash rate in almost 30 years will see detached home building activity slow to its lowest level in a decade by 2024.
“If the RBA doesn’t ease the cash rate in 2023, the Government’s goal of building 1 million homes in five years will be very difficult.”
For the three months to October 2022, compared to the previous three months, new home sales in Queensland were down by 31.9 per cent, Victoria down by 22.8 per cent, New South Wales down by 19.6 per cent, and Western Australia down by 9.1 per cent.
South Australia was the only market to see an increase, up by 13.9 per cent per cent.