New home sales crater

From the HIA!

New home sales fell to their lowest level in over a decade in March 2012, said the Housing Industry Association, the voice of Australia’s residential building industry.

HIA Chief Economist, Dr Harley Dale said the Reserve Bank of Australia needs to act boldly tomorrow and cut the official cash rate by 50 basis points.

“The Bank needs to send a clear signal that it is back on the case of assisting an economy that is clearly weaker than it anticipated in 2012,” said Harley Dale.

“Leading housing indictators such as new home sales are pointing to on-going deterioration in already very weak new home building conditions,” said Harley Dale. “That situation is in turn having a major negative impact on manufacturing and services sectors.”

“It is not too late to turn the situation around and prevent new housing from revisiting a  GFC low. Interest rate cuts, while no panacea, can provide substantial assistance in restoring confidence and activity,” noted Harley Dale.

“Needless to say Australia’s banks need to pass all official rate cuts on in full. Their actions to date on interest rates have damaged economic confidence and activity,” added Harley Dale.

The HIAJELDWEN New Home Sales report, based on a survey of Australia’s 100 largest builders, showed a sharp decline of 9.4 per cent in total seasonally adjusted new home sales in March 2012.

Detached house sales dropped by 9.7 per cent while multi-unit sales fell by 6.9 per cent.

In March 2012 the number of seasonally adjusted new detached house sales fell by 9.7 per cent in New South Wales, 4.6 per cent in Victoria, 15.3 per cent in Queensland, 4.7 per cent in South Australia, and 12.0 per cent in Western Australia.

Only one small problem. Rate cuts won’t get new home sales moving unless credit and house prices resumes rising. Rather, the sector needs supply side reform to lower the cost of houses and bring the cost into line with valuations.

2012-03 NHSS National Media Release

David Llewellyn-Smith
Latest posts by David Llewellyn-Smith (see all)

Comments

  1. rob barrattMEMBER

    Looks like May 2011 was the Minsky moment. The euphoria seems to have fallen out of the sandwich. Where’s BIS Shrapnel when we need them?

  2. With numbers like these one could be excused for thinking Q1 2012 will be a negative quarter for the economy.

  3. I am not sure if rate cuts will cut it. It would seem most in Australia have wised up a lot and know that Australia is all about mining, thus everything else is going down the toilet such as manufacturing, retail, even education as the Aus dollar is high and makes its expensive for foreign students (I wonder if that has helped to slow the property market, less foreign students renting, buying etc…)

    Banks don’t follow the RBA anymore, a rate cute of 25 to 50 most likely won’t be passed on, or won’t be passed on in full.

    The EU is a lead ship in the sea. The only place it can go is down.

    All these things spell doom for the property market. The average Joe Blogs is slowly learning about all of this and is waiting.

    In total desperation you have the likes of ANZ’s CEO Mike Smith going to Hong Kong to spurk the property market to the Asians as are many other’s in related industry.

    In fact, a rate cut may just well milk this dying cow just a little bit longer, but in the long run it will just drain the life force even faster out of the market.

  4. reusachtigeMEMBER

    So, what are these rent seekers going to call for when rate cuts and grants have absolutely no effect anymore?

  5. So what’s going on here then? Is this just a reflection of developers inability to price their properties lower to meet the market, developer price expectation way out of whack, or a strong indictator of falling buyer sentiment?

  6. This continuous lobbying for interest rate reductions is annoying! A sustained zero interest rates in the US hasn’t exactly make any difference to the property market there has it?

  7. RBA should only cut by 25 bps to show cry babie’s like Harley Dale who is in charge.

    Dale is pathetic. the RBA needs to do this, the banks need to do that? gimme a break. the HIA blew a housing bubble and now they are paying the price. didnt hear the HIA complaining while all their members were profiting obscenely from a housing bubble they were cheerleading all the way.

  8. I ran into a friend of mine over the weekend whose family is in building and property development (sizable in both) and his comments were interesting.

    Whilst he acknowledges tht the market is really crappy, their property development business is just waiting it out as they are using their own money and have little pressure on them to drop prices to meet the market. He tells me that there is still really good money in it, and that they can afford to either drop or land bank if they like at present.

    From the building side of things it’s a slightly different story. Culling the number of subbies has made a big difference as the company itself always ran pretty lean. No growth on offer but modest profits all the same.

    Mixed fortunes in the one industry it seems…

    • I was also at a kids party on the weekend and had the wife of a local real estate agent (principal of that business) complaining to my wife about how hard business is lately, and how hard her husband is having to work to make ends meet.

      Perhaps it’s the loans on the his and hers Mercs they have parked in their driveway…shame that.

    • As with any industry, some businesses are run better than others.

      I’m wondering what’s going to happen as soon as the negatively geared property speculators realise that their precious capital gains assumptions were ridiculously overestimated and can’t emotionally sustain their loss-making investments?

    • I often hear the same thing – the reality is these types of people are simply builders turned developers. Their position is simply

      “fire the staff and don’t sell the three flat subdivision in Elsternwick until prices pick up – we’ll make a fortune in a 12 months if just wait..”.

      The truth is there wont be a pick up for a decade – not a chance. We are either going to see the long Japanese Winter, or the US Fall.

      These types almost always refuse to acknowledge there is any possibility that Real Estate goes anywhere but,

      “UP, UP, AND UP – every seven years TOO..”.

      They will have to realise their investment eventually – they have absolutely no choice – and the longer they wait the greater the hair cut – that’s all there is too it – beyond that, they’re full of crap.

    • GB, you’ve made a few good comments in your time, but this one takes the cake. You’ll be labeled a denier if you’re not careful 😉 Unbelievable article there as well. I had to search for the original to see if it wasn’t published on the 1st. That’s truly a high watermark in my mind.

  9. H’n’H, do you think that freeing up supply side constraints would actually generate more positive sentiment within new buyers than it would create negative sentiment through the downward pressure on the values of existing homes at this point in time?

    I get the impression that the window of opportunity for sensible changes such as this has well and truly passed, and that any changes of this ilk will simply exacerbate the trends.

    It would seem that the cure is now in danger of causing more harm to the patient.

    • This man knows the score. The damage has well and truly been done. However freeing up supply for the future can prevent future property bubbles from cropping up in the future.

  10. Not being overly-familiar with this industry and the data could someone correct/confirm my observation of the data (in the first graph) that we are still approving (and building?) as many homes as we did 3 years ago but we are selling approx 30% less of those homes?