Yesterday’s jump in new home sales in December, whereby sales rose by 6.2% over the month, breathed new life into the Reserve Bank of Australia’s (RBA) and Treasury’s plan for housing construction to fill the void left as the mining investment boom starts to unwind later this year.
While the rise in new home sales was a welcome boost to an industry in recession, the outlook for housing construction remains fairly precarious.
First and foremost, despite the jump in sales in December, sales levels were still below the same time last year, which meant that new homes sales nationally hit fresh all-time (16-year) lows on an annual basis (see next chart).
Sales in the labour-intensive detached house component remain particularly weak, with sales in all mainland states, except Western Australia, at 16-year lows on an annual basis (see next chart).
Moreover, house sales have still failed to respond to the -1.75% of cuts to official interest rates since November 2011, with sales levels falling by -15% since rates were first cut. This compares to an average 33% rise in new home sales at the same stage of the three previous interest rate-cutting cycles (see next chart).