Please forgive the headline, but the HIA JELD-WEN new home sales report for January is out and the news is so poor despite two rate cuts that I’m sure how else I’m supposed to put it:
New home sales began 2012 on a weak note, a disappointing outcome given there was also a fall in December last year, said the Housing Industry Association, the voice of Australia’s residential building industry.
The HIA – JELD-WEN New Home Sales report, based on a survey of Australia’s 100 largest builders, showed a decline of 7.3 per cent in total seasonally adjusted new home sales in January 2012.
“A sharp decline of 19.6 per cent in detached house sales in Victoria weighed on the overall January result,” said HIA Chief Economist, Dr Harley Dale. “Nevertheless, there were also declines in detached house sales in New South Wales and South Australia in the first month of 2012 so the overall update is a weak one.”
“Clearly the interest rate cuts of late 2011 were insufficient to generate a sustained improvement in new home building conditions. That is a concerning outcome given new home building is a key barometer of the health of the domestic economy and it further highlights the inappropriateness of the rise in interest rates we endured earlier this month,” said Harley Dale.
Detached house sales fell by 7.4 per cent in January 2012 and eased by 0.5 per cent over the January 2012 ‘quarter’. When compared to the three months to January 2011, detached house sales dropped by 11.9 per cent. Multi-unit sales partially reversed their big jump of December 2011, falling by 6.3 per cent in January this year. Multi-unit sales fell by 14.1 over the quarter to be down by a substantial 25.1 per cent when compared to the three months to January 2011.
“Victoria for a long time propped up new home building in Australia and now the reverse is occurring,” said Harley Dale. “New home sales, along with other leading housing indicators, are showing that other large markets in Australia are not filling the void in 2011/12.”
As we’ve been saying for a year or more, the Melbourne building boom is a time bomb. It appears to be now going off. The fallout will depend upon how heavily the wave of oversupply hits established home prices. And how well the boom sectors can soak up the idle labour. So far so good but I worry for Victoria.
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.
