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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.
“This data produced the weakest quarter since June 2020, when the national lockdown drove Australia into its first recession in almost 30 years,” added Mr Reardon.
“New home sales fell in the month of September, for the third consecutive month, by a further 4.2 per cent.
“This reflects the increasing weight that the RBA’s tightening cycle is placing on home buyer borrowing capacity.
“The RBA increased the cash rate again in October, and this will further accelerate the decline in new home sales.
“The RBA’s most acute tightening cycle in almost 30 years is occurring at the same time as the industry is experiencing the fastest increase in home building costs in almost 50 years.
“These compounding forces will see sales continue to slow and the full impact of the rise in the cash rate is yet to emerge.
“This month’s data shows that home building is past the pandemic peak and is now set to experience a long COVID slow down.
“Given the longer-than-usual lags in this building cycle, the RBA’s rate hikes to date will similarly take longer than usual to affect the broader economy.
“Much of the impact of the RBA’s tightening cycle will be obscured until the second half of next year.
“These treacherous lags will force the RBA to wait longer to see the easing in price pressures that it desires. This could result in them weighing too heavily on household finances and jeopardising the housing industry’s future soft landing,” concluded Mr Reardon.
For the three months to September 2022, compared to the previous quarter, most states declined under the weight of interest rates. Victoria led the declines, down by 20.8 per cent, followed by Queensland (-17.0 per cent), New South Wales (-16.3 per cent) and Western Australia (-10.0 per cent). South Australia saw the only increase, up by 6.6 per cent.
“Trade shortages loom as a major threat to reaching the Housing Accord target of building 1.2million homes by 2029,” said HIA Executive Director - Future Workforce, Mike Hermon.
“The Victorian government’s Housing Statement is approaching its two-year anniversary. Since that time the Victorian government has implemented some positive reforms, but it is becoming clear that we will not have enough people to build these homes as quickly as we need,” stated HIA Executive Director Victoria, Keith Ryan.
With the focus of the national economic debate on improving productivity following the recent roundtable, HIA used our submission to the Productivity Commission’s Five Pillars reforms to call on the Federal Government to act swiftly to lift productivity and unlock new housing supply.
“The Victorian government’s Housing Statement target of 800,000 homes in ten years is now not going to be realised. A meaningful and sustained increase in the housing supply will only occur if the Victorian government takes notice of consumer’s preferences and gives up on the 70/30 policy favouring apartments over houses,” stated HIA Executive Director Victoria, Keith Ryan.