By Leith van Onselen
The release of the HIA-Jeldwen New Homes Sales report earlier this week was a disaster for Australia’s residential construction industry, with new home sales in March falling to the lowest level since 1994:
Two states where the situation appears particularly worrying are Victoria and Queensland, where new house sales are running at roughly half the level of 2010 (see below charts).
Both states have offered generous grants to first home buyers purchasing new homes, and these subsidies, combined with generous incentives offered by builders/developers (including price reductions, cash-back offers, and bonus luxury inclusions), have failed to spur new home sales in both states.
The question then beckons: what will happen to new home sales when the housing stimulus runs-out? The $13,000 Victorian First Home Bonus, which is available to first-time buyers of new homes, will expire on 30 June 2012. Yesterday’s Victorian State budget ruled-out extending the grant, meaning that new home buyers will have significantly less to spend from 1 July.
Similarly, the $10,000 Queensland Government Building Boost Grant for first time buyers of new homes expired on 30 April 2012.
First home buyer demand in both states is already subdued, as represented by the number of housing finance commitments running well below average levels, despite the recent pick-up in Queensland (see below chart), and the expiry of these grants is sure to rub some more salt into the wounds of the residential construction industry.
More worrying from a Victorian perspective is that there is still a large number of new homes in the construction pipeline, just as population growth has moderated (see below chart).
Who is going to buy these new homes now?
