New home sales plunge to new low

HIA New Home Sales for August are out and the news is dour with a new record low for the cycle:

New home sales fell to a 15 year low in August 2012, signalling the importance of interest rates again  heading down said the  Housing  Industry  Association,  the  voice  of  Australia’s  residential  building  industry.

The HIA New Home Sales report, a survey of Australia’s largest volume builders, showed a decline of 5.3 per cent in August 2012, reflecting a fall of 5.8 per cent in the persistently weak detached housing segment and a 2.5 per cent decline in the multi-unit market.

“New home sales for August are the latest in a string of soft new housing updates for this financial year, and that follows a very weak year for new home building in 2011/12,” said HIA Chief Economist, Dr Harley Dale.

“Indeed, following two consecutive years of decline in new housing starts over 2010/11 and 2011/12,  and leading indicators pointing to weakness extending into 2012/13, policy settings in August 2012 were clearly inappropriate,” Harley Dale said. “A fresh round of interest rate cuts will help rebalance  this situation, although financial institutions obviously need to play their role in cementing this outcome.”

“It remains the case, however, that rate cuts won’t single-handedly generate the new home building recovery Australia requires. Governments have an important role to play in driving reform measures to lower the excessive tax base faced by the sector. In 2012 that reform process remains too slow and in some quarters is virtually non-existent,” added Harley Dale.

In August 2012 the number of seasonally adjusted new detached house sales fell by 7.0 per cent in New South Wales, 8.6 per cent in Victoria, 2.9 per cent in Queensland, 2.6 per cent in South Australia, and 9.4 per cent in Western Australia.

David Llewellyn-Smith
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  1. Plenty of demand for new housing.

    Just not at current prices.

    An abundance of good intentions without regard to their impact on the cost of new land is the problem.

    Anyone who wants to impose a restriction or regulation on the conversion of cow paddocks to home sites should be required to calculate the cost of their requirement and publish their justification so potential new home owners know who to chuck fruit at.

    Cost is always no object to the high-minded when someone else is paying the price.

    • Unless your “cow paddock” is my productive agricultural asset or otherwise in the middle of a functioning rural community. You probably wouldn’t know what one is.

      • Ouch!

        I gather from your comment that you have no interest in converting your productive agricultural assets to home sites. Well good for you, no one is suggesting that you do.

        But it sounds like you want to stop the farmer down the road subdividing some of their land and selling it for home sites.

        Sounds nice in theory keeping all that land for productive agriculture purposes but if you (or the gummint) want to do that you are always free to buy it and run it or lease it to like minded souls.

        In practice what it means is that the only people who make money from developing agricultural land into home sites are the ‘insiders’ who are able to negotiate and influence the system of town planning and zoning. The very ones who are now very keen that ‘new land’ is not released for home sites in Sydney.

        Any wonder that rural Australia is struggling to attract residents when even in small towns surrounded in every direction by productive assets, affectionately known as cow paddocks, the magic of zoning cranks up the cost of new home sites.

        If people are serious about getting money out and about in the economy they need to get serious about the causes of the big housing money pit sucking up large chunks of disposable income.

      • Kateged. There is plenty of crappy, non-productive rural land that could be used for housing if only the planners allowed. You only have to drive north or west of Melbourne to see it in abundance. The argument that Australia is ‘running out of farm land’ is crap, quite frankly.

        • I am happy for crappy, non productive land to be developed. Included in the sights of councils and developers however is land of real value, agricultural and otherwise.

          The system of town planning and zoning is expensive, clumsy and open to corruption but gives stakeholders our only chance to object. I am sorry, but blithe comments about impediments to urban development being a scourge of the nation are irritating.

          I cherish the fact that certain individual and property rights are upheld in this country or at least seem to be. If unhappy, there are several nearby autocracies who would love your business model.

  2. Harley Dale said. “A fresh round of interest rate cuts will help rebalance this situation, although financial institutions obviously need to play their role in cementing this outcome.”

    I do hope actually believes that… all the way to ZIRP.

    The last thing we need is Harley Dale begging and lobbying for fiscal stimulus.

  3. tsport100MEMBER

    How many years will it take for these land-bankers / Landcom bone heads to get it through their sculls…. New house prices are too high!

    What’s the natural market response to reducing demand? Discounting… but not when crony capital is involved!!

    These idiots think they can keep pulling levers to adjust supply and obscure price discovery to force demand into higher prices… that only works for so long before they run out of greater fools! (never heard of the bell curve?)

    The game is up guys! Start adjusting prices towards reality or perish while the ‘market’ does it for you!

    • The problem is tsport100, building costs have remained constant for a number of years now, it’s the cost of land that has sky rocketed. State governments and local councils have become addicted to the revenue stream. Here’s a few exerts from a Canberra Times article “Land sales contribute $483m to ACT coffers” that highlight the issue.

      “Rain, hail and the Commonwealth’s bureaucracy have failed to dent the ACT government’s primary revenue source – land sales.”

      “The Land Development Agency doubled its income from the previous year, achieving $482.7 million compared to $240.2 million in 2010-11. Yet this significant jump was well below the government’s expectations of $734.4 million.”

      “The Land Development Agency has warned its political bosses not to expect a full recovery for several years, writing down its revenue expectations for the next financial year by another $96 million.

      “The disappointing result is a key driver of the $125 million budget deficit result projected for this financial year. The LDA is tipped to achieve a pre-tax profit of just under $200 million, despite the sales slump, but next year expects to make just $103 million, gradually improving to an expected profit of about $236 million in 2015-16.”

      I fail to see how they can expect a recovery in 15-16, probably taken the RBA and Treasury’s book of optimism not the book of realism.

  4. Someone at work has been building a new place. Week after week it’s hearing about what you can’t do – can’t have a powerpoint here, can’t have the shower there unless you do this, can’t have glass here, can’t have a door there, can’t have that without this. I don’t know why anyone would bother.

      • It’d be builders for sure flawse. They’ve had it so good for so long they wouldn’t know what customer service was if it bit them on the lemonade and sars. They’ve been very inflexible over the last 10-15 years. It’s slowly becoming a case of change or perish……..about time too.

      • From what I can glean it’s the regs. Not a spec job and they’re well acquainted with the builder.

        A lot of it seems weirdo OH&S stuff. The bathroom seems pretty onerous in regards to where power points can go. Gotta be x distance from the sink, towel rail needs to be this distance from the sink or the switch can’t be in the room!

  5. Sorry Harley, high land prices are excluding the FHB’s, not i rates or red tape. I continue to be amazed by the builders genuflecting before land developers. These people are not your friends.

    Don’t Buy Now!

  6. What about the increase in grants for new homes which start in September, and the end of FHOG for existing homes?

    Surely anyone considering buying a new home in August – when the grant changes were known about – would wait until later in the year to get the bigger grant?

    Seems like the flipside of the recent rise in prices for existing homes – there will be pressure on both to reverse once the new grant system kicks in i.e. new home sales to increase, and price of existing homes to fall, from October onwards.

  7. How can this be when some commentators on MB were shouting that lowering interest rates would lead to a property rush??
    As we argued at the time, it aint going to happen.
    The clowns also cried that interest rates would not bring down the $A and there was no point in lowering rates. WRONG again!
    $A is falling as it needed to months ago. THE RBA as I repeat again are over paid buffoons that get it wrong time after time and only move when forced to. Reactive simpletons not pro active specialists. Australia needs to set its rates at competitive global levels or we will continue to see huge damage to much of the economy.