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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.
“Sales of new homes increased by 9.4 per cent in the month of May 2023 compared to the previous month, leaving sales in the last three months higher by 4.4 per cent on the previous quarter,” added Mr Devitt.
“Despite this small rise in sales, they remain at depressed levels. Sales in the three months to May 2023 were more than 40 per cent lower than in the year before when interest rates started to increase, and 25 per cent lower than prior to the pandemic. This indicates that the slowdown in home building that is underway will continue for at least the next year.
“The most significant contraction in sales is in New South Wales where customers are more sensitive to rises in the cash rate.
“Cancellations also remain elevated at a rate of 25 per cent in the last quarter. This means, for every four new projects a builder is recording, a previous project is being cancelled.
“The RBA’s rate increases will continue to hold down new sales and cause further cancellations as finance becomes unobtainable for an increasing number of buyers.
“The significant increase in the cost of land and construction across all jurisdictions over the past two years is compounding the impact of higher interest rates. The additional costs of compliance with the National Construction Code, that come into effect this year, will further increase the cost of new home construction and dampen demand further.
“This combination of factors will see home building continuing to contract for at least the next 12 months to its lowest level in more than a decade,” concluded Mr Devitt.
Sales of new homes in the three months to May 2023 compared to the same time last year are still down in most large states, led by New South Wales (-63.6 per cent), and followed by Queensland (-52.9 per cent), Victoria (-46.6 per cent) and South Australia (-29.5 per cent). Western Australia saw the only increase over the year, up by 19.4 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.