New home sales lifted in November but still lowest annual sales on record

By Leith van Onselen

From the Housing Industry Association (HIA) today comes news that new homes sales are staging a tentative recovery, particularly in the detached house segment. Total new home sales rose by 4.7% in November driven by 7.7% lift in detached house sales, whereas sales of multi-unit homes (apartments) fell by 6.9% following a spike in October.

From the HIA:

Up until this latest result it had been volatility in multi-unit sales that had provided some positive impetus in aggregate new home sales which occurred against the back drop of a trend decline in detached house sales – so it is encouraging to the see that in November the positive result was driven by the important detached house segment of the market.

Looking out beyond the monthly improvement, the quarterly change in the volume of sales over the three months to November 2012 still fell by 5.3 per cent and remains at a level that is 15.7 per cent lower than in the same period in 2011. Detached house sales fell by 8.0 per cent over the three months to November 2012 (-24.1 per cent relative to a year ago) while multi-unit sales increased by 9.3 per cent (+64.4 per cent relative
to a year ago).

So, while this headline result is encouraging, it still remains that total dwelling sales declined over the latest three months and in annual terms –  an overall profi le showing a full recovery has a long way to run.

Furthermore, inspection beneath the aggregate offers a geographical insight into the November improvement in detached house sales. Looking across the five mainland states, November saw detached house sales increase in New South Wales (+15.8 per cent), Victoria (+15.6 per cent) and South Australia (+6.7 per cent). Meanwhile, detached house sales declined in Queensland and Western Australia by 0.1 per cent and 6.8 per cent, respectively. Increases in the two most populous states is encouraging, however we don’t expect this to herald an emerging upward trend in Victoria over the medium term. Furthermore, while improvements in NSW will be needed to drive any aggregate recovery in 2013, WA and Queensland are still vital to achieving this outcome. WA has made healthy gains throughout the year, though Queensland has yet to demonstrate any sign of a turnaround in the persistent trend decline.

At this juncture, signs of recovery remain tentative. There is still a long way to go before new home sales are restored to healthy levels. Furthermore, the improvements are lacking in some important areas where we must see improvements. The importance of a broad based rejuvenation of new home building activity in maintaining the health of the overall Australian economy has been widely acknowledged, but at this stage, new home sales sits among a host of indicators that are yet to provide conclusive evidence that we are on track to achieve this.

It’s important to note that despite this month’s lift, annual new home sales are still tracking at their lowest recorded level in the series’ 16-year history:

 

Comments

  1. Well if that fall in new home sales (and one assumes construction) didn’t make way for the mining and processing investment boom, what would?

    And as the mining and processing investment boom washes off in 2014/5, there will be a housing shortage waiting for first home builders grants and infrastructure projects to pick up the displaced tradesmen from the decline in mining investment.

      • Lets hope the plan works. Of course, everyone had his dog had a ‘plan’ prior to December 2007.

        Lots of ‘plans’ haven’t gone to plan since…

    • “Well if that fall in new home sales (and one assumes construction)”…

      Explorer, why would you assume construction is falling?. New Dwelling Construction is not falling in line with sales. NDC has been running consistently at around ~150k ND pa (see chart #1) for at least the last 3yrs (and longer from memory). What the above charts/data show is we have is a growing stockpile of new unsold homes.

      • That’s the impression that I get as well, and I know that building approvals have lifted in NSW and Qld lately.

        But building approvals are not the same as new home sales, it’s collected differently. Many of those sales would be just recorded as land sales.

        I don’t know what the net wash up is.

      • Yes it is confusing and I didn’t articulate that well. New home sales are the sales of “completed new homes” or “units”, however building approvals contain new homes being constructed for clients, which aren’t collected in the new home sales data, but are included in the building approvals.

        Which is why I look at this data and think “well that’s nice but what are the actual totals of new homes sold plus new homes built.

        Understand? Sorry if I was vague.

      • GunnamattaMEMBER

        ‘… we have is a growing stockpile of new unsold homes.’

        +1 For sure.

        Construction has been motoring along relatively well, and in Victoria positively roaring. But they need buyers and with debt strapped out there is only one of A. Encourage more debt B. Encourage greater immigration or access for foreigners to new builds (not that I have any issue with migration to Australia by foreigners) or C. Manage prices somehow down.

        There are those who see the last 18 months or so as a hiatus which is actually taking place in lieu of a correction and buying time for the market to adjust. I tend to see the last 18 months as reality deferral (fuelled by -175Bp in rates) and just setting us up for a bigger adjustment later on.

      • ABS 8755 Table 7 would indicate that the nominal value and Table 9 (building only) nominal value total for Sep12 would indicate that the nominal totals are both less than Sep08 and about average for the period Sep08 to Sep12 in nominal terms.

        So
        1. less (but by very little) in nominal terms than Sep08
        2. less in real terms by about 10% than Sep08 3. less in population adjusted terms which is relevant but not determinative of households
        4 so less in population adjusted real terms as well.

        I didn’t add in Engineering Construction as I figure this is the mining/processing sector.

        So all up, given the comparative numbers, the dollar terms are not a substitution. I don’t know about in employment terms, which I personally think is what really matters.

        Will the labour released from mining/processing after the build phase find other jobs in a reasonably short period of time? To my mind that is the burning issue for unemployment and house prices.

        Does anyone know of any recent estimates of this potential labour flow?

      • Explorer,
        Do you contend that we are currently purchasing as many new dwellings as we are building?
        If so, what is your basis for this contention?

      • Here in the Hunter, the coal mining industry has been hit hard, and yet there is still heaps of house building going on. Even the real estate agents I have spoken to are saying “oversupply” and are predicting capital falls.

      • As its always said it takes a long time for sentiment to turn in the property market and once it goes one way its hard for it to change direction.

        Many people are still in the “super boom” mindset and it will be a while before they realise the party is over. Most likely once they realise their knockdown 2 unit project isn’t going to make them any money once every thing has been paid for.

  2. In this low turnover market, sellers and particularly Boomers looking to cash out are in for a real shock. Stock on market is set to climb significantly.

  3. It went up last November from October as well. Then look at what it did!

    That is one ugly trend.

  4. seems like an oversupply caused by the boom of yesteryear, reducing demand for new homes at present, that graph makes the entire property market look bad, should be a slight uptick if all housing sales are taken into account.

  5. Could the increase in new home sales in NSW have anything to do with the change in first home owner grants being increased for new builds and abolished for existing properties in Oct? Not sure if the same applies to VIC?

  6. I guess there is some relationship between this outcome and the sudden change in investor behaviour we have recently witnessed – building new homes rather than just buying existing ones as they have long done. I did read that property investment is largely behind the tentative hosing recovery in the US.