The HIA new homes sales for April are out and, superficially, look good again:
Total seasonally adjusted new home sales posted their fourth consecutive rise in April 2014, increasing by 2.9 per cent. The headline result was driven by a 9.3 per cent lift in multi-unit sales which was helpfully complimented by a 1.8 per cent increase in detached house sales.
The quarterly profile of new home sales continues to reveal a healthy and relatively broad-based story. Total sales increased by 6 per cent over the three months to April 2014 to be 25.4 per cent higher than in the comparable three month period for 2013.
Detached house sales increased by 8.5 per cent over the April 2014 ‘quarter’ to a level 27.9 per cent higher than for the three months to April last year. Quarterly gains were evident in four out of fivemainland states with South Australia proving to be the only exception.
Compared to a year earlier, the volume of detached house sales grew in all five mainland states.
Detached house sales continue to trend higher in what is currently a slightly more bullish outlook for detached house construction than that implied by ABS detached house building approvals.
Well, yes, but there’s a catch. NSW and VIC have flat lined since June last year and within two months will likely no longer be growing year on year. QLD and SA both rallied later but haven’t grown in three and six months respectively. Only WA is still showing an upwards trend. In short, new houses look peaky.
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For apartments:
Despite a decent monthly gain in April, sales of multi-units fell by 6.7 per cent over the three month period, but were still 12.5 per cent up on the April 2013 quarter result.
The downward trend for multi-unit sales is therefore persisting. This profile is also evident for ABS building approvals formulti-units. Levels are nevertheless elevated and healthy multi-unit construction can be expected in 2014/15.
New dwelling commencements (housing starts) enjoyed a robust 11 per cent gain in calendar year 2013, albeit one that was narrowly based. Leading indicators such as new home sales and building approvals point to further growth in 2014.
The April new home sales update provides further encouragement for this outlook.
The key in mid-2014 is to see leading indicators of new housing continuing to signal upward momentum in new residential construction; together of course with evidence that renovations investment has turned the corner and will head higher again. If the leading indicators for residential construction falter or reverse course, that would provide powerful indication of an approaching downside to Australia’s growth outlook for the next 18 months.
In the month of April 2014, private detached house sales increased by 6.4 per cent in Western Australia, 5.2 per cent in New South Wales, and by 0.5 per cent in Victoria. Sales fell by 2.1 per cent in Queensland and were down by 6.0 per cent in South Australia. Over the three months to April 2014 sales increased by 20.6 per cent in Queensland, 11.4 per cent in WA, 11.1 per cent in Victoria, and 0.5 per cent in NSW. Sales fell by 6.7 per cent over the April ‘quarter’ in SA.
It’s been a good rally but my guess is we’ll see the headline index turn lower in two months.
David Llewellyn-Smith is Chief Strategist at the MB Fund and MB Super. David is the founding publisher and editor of MacroBusiness and was the founding publisher and global economy editor of The Diplomat, the Asia Pacific’s leading geo-politics and economics portal.
He is also a former gold trader and economic commentator at The Sydney Morning Herald, The Age, the ABC and Business Spectator. He is the co-author of The Great Crash of 2008 with Ross Garnaut and was the editor of the second Garnaut Climate Change Review.
