New home sales “past their peak for the cycle”

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By Leith van Onselen

The Housing Industry Association (HIA) has released its latest new home sales report, which registered a 4.7% decline in new homes sales in April, with both detached houses (-3.0%) and units (-10.8%) recording falls:

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The monthly decline in detached house sales was widespread, with four out of the five mainland states recording reduced sales in April. Victoria bucked the trend – monthly sales of detached houses increased by 14.3 per cent due to broad-based strength in large volume builder activity in the state during the month.

“The trend in new home sales reiterates that the peak for the cycle has passed, but the descent we’re now observing is very mild,” commented HIA Economist, Diwa Hopkins. “This signals the potential for very healthy home construction activity throughout 2016, much as we have been anticipating.”

“This overall trajectory of total new home sales is consistent with our long-held expectations for new home building activity”.
“Our forecasts reflect an expectation that a modest decline in new home building in 2016 will be largely driven by a decline in multi-unit construction, following the successive record levels that occurred in 2015 and 2014.”

In the month of April 2016 detached house sales declined in four of the five mainland states: Western Australia (-19.8 per cent); New South Wales (-8.1 per cent); Queensland (-7.8 per cent) and South Australia (-1.3 per cent). Only in Victoria did detached house sales increase (+14.3 per cent).

Sure. Building activity will hold-up okay this calendar year. But it is 2017 and 2018 that we should be worried about given that it will also coincide with the ongoing decline in mining investment and the closure of the car industry.

What will rise up to fill the void?

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About the author
Leith van Onselen is Chief Economist at the MB Fund and MB Super. He is also a co-founder of MacroBusiness. Leith has previously worked at the Australian Treasury, Victorian Treasury and Goldman Sachs.