The HIA New Home Sales report – a monthly survey of the largest volume home builders in the five largest states – is a leading indicator of future detached home construction.
“The rise in the cost of borrowing will compound the impact of the rapid increase in the cost of building a new home that occurred due to the constraints on global supply chains,” added Mr Reardon.
“The full impact of the rate increases will continue to flow through as an adverse impact on the sale of new homes for at least the next few months.
“This slowdown is consistent with reports from builders over recent months which have seen the number of people visiting display sites and making enquiries slowing since the first increase in the cash rate in May.
“If this decline in sales is sustained, which is expected, then the 1.75 per cent increase in the cash rate so far, will have brought this pandemic building boom to an end.
“There remains a significant volume of work under construction and approved-but-not-yet-commenced that will provide a buffer for the industry and ensure building activity and demand for skilled trades remains exceptionally strong through the rest of 2022 and into 2023.
“There remains a risk, however, that the adverse impact of rising rates on the wider economy will be obscured by this volume of ongoing work and that the RBA goes too far, too soon,” concluded Mr Reardon.
All of the major states saw a decline in new home sales in July, led by Queensland (-15.5 per cent) and New South Wales (-15.3 per cent), followed by Western Australia (-13.5 per cent), Victoria (-11.1 per cent) and South Australia (-9.7 per cent).
Compared to the same month in 2019, however, most of the states were still up, led by Queensland (+34.0 per cent), Victoria (+17.8 per cent), New South Wales (+12.8 per cent), and Western Australia (+8.2 per cent). South Australia saw the only decline over this period, down by 9.9 per cent.