Downturn in new home sales pauses

A downturn in new home sales paused in September following declines in the order of three per cent in each of the previous two months.

The HIA New Home Sales report, a monthly survey of the largest volume home builders in the five largest states, provides an early indication of trends in the residential building industry.

“The report shows private detached new house sales edged higher by 1.1 per cent in September 2018, reaching a level that is nevertheless 4.6 per cent lower than in September 2017,” HIA economist Diwa Hopkins said.

“Despite the monthly pause, the longer term trend of decline in sales remains in place, we still expect new home building to decline in 2019.

“With activity on a clear path to decline in 2019, the key questions now go to the overall building cycle – when and at what level the downturn will reach a floor and then ultimately return to growth.

“Traditionally, new home building downturns last about seven quarters, while the magnitude of the declines have ranged between 13 and 35 per cent.

“A strengthening economy and low interest rates distinguishes the current downturn from those before it.

“We expect the current downturn to have some unique characteristics, while we expect the current downturn to be longer than what has been typical – spanning some 18 quarters peak to trough – we expect the trajectory to be relatively modest.

“The total decline is forecast to be in the order of 20 per cent,” concluded Ms Hopkins.

Private detached house sales in September increased in all but one of the mainland states: by 7.9 per cent in Victoria; 4.0 per cent in Western Australia; 0.6 per cent in New South Wales, and; 0.4 per cent in South Australia with sales in Queensland falling by 10.8 per cent.