As summarised by Houses & Holes, the Housing Industry Association (HIA) yesterday released new home sales data for the month of February, which registered an overall -5.3% fall in new home sales over the month, with detached house sales falling by -4.0% and unit sales falling by -11.0%. It was a disappointing result that reversed some of the gains experienced over the prior four months (see next chart).
In fact, on a rolling annual basis, overall new home sales were the second lowest in the series’ history, marginally above December’s record low, with detached house sales hitting a fresh all-time low (see next chart)
Last month, Property Observer released a great primer summarising the various incentives on offer from Australia’s state and territory governments for purchasers of “off the plan” dwellings. Below are the incentives on offer (quoted from Property Observer) compared against the latest new house sales & house approvals data. As you will see, the results are not pretty, with these incentives so far failing to stimulate house sales across Australia’s major markets.
New South Wales:
A first-home buyer who purchases a $550,000 new home will get $35,240 in assistance. This includes a $15,000 grant for firsthome owners who purchase or build a new home valued at up to $650,000. The grant is available until December 31, 2013, reducing to $10,000 from January 1, 2014. Non-first-home buyers, including investors, who buy a new home are eligible for $5,000, whether the new home is off the plan or newly built, with a value up to $650,000. The $5,000 grant is also available to buyers of vacant land that is intended to be the site of a new home, valued up to $450,000. First-home owners are also eligible for a maximum stamp duty saving of $20,240 for homes up to a value of $550,000, with duty concessions for new homes valued between $550,000 and $650,000. The transfer duty exemption cap on vacant land is $350,000, with duty concessions for vacant land valued between $350,000 and $450,000.
Despite the generous incentives on offer, it was the worst February new house sales on record (see next chart).
Rolling annual new house sales in February 2013 were also tracking at their lowest level on record, whereas house approvals are showing signs of improvement:
Victoria:
There are no special incentives for off-the-plan buyers in Victoria after the government removed the $13,000 First Home Bonus on 1 July 2012. Accordingly, new house sales have tanked, hitting the lowest annual level in the series’ history following the worst February sales on record, with house approvals also falling sharply:
Queensland:
A $15,000 first-home owner construction grant (FHOCG) is available. The FHOCG applies to new property bought or built at a value under $750,000. First-home buyers also pay no duty on purchases up to $500,000, with a phasing-out rebate applicable for values up to $600,000.For non-first-home buyers, the Queensland government offers a concessional stamp duty rate of 1% up to a value of $350,000, with stamp duty charged at normal rates for the remaining value of the home purchase. The buyer must occupy the home for a period of 12 months – an applicant may lose the concession if he or she sells or leases part or all of the home before moving in or within a year of moving in.
Despite the generous government incentives on offer, it was the worst February new house sales on record (see next chart).
Rolling annual new house sales in Queensland also fell to their lowest level in the series’ history in February, whereas approvals have picked-up recently (see next chart).
South Australia:
South Australian first-home buyers buying off the plan have the chance to secure up to $23,500 from the state government, provided they buy or build a new home. The $23,500 handout comprises a doubled first-home owner grant of $15,000 for contracts entered into up to a value of $575,000, plus a further $8,500 housing construction grant (HCG) available until June 30, 2013. The HCG is available to all buyers of new homes for properties valued up to $400,000, phasing out for properties valued up to $450,000 where contracts are entered into between October 15, 2012, and June 30, 2013, inclusive. If you are purchasing a new or substantially refurbished apartment:
• within the area of the Corporation of the City of Adelaide;
• on any land within the area where the Bowden Redevelopment project (Bowden Village); or
• on any land located within the area known as 45 Park, Gilberton;
You may be eligible for an off the plan stamp duty concession of up to $21,330 (capped at stamp duty payable on a $500,000 apartment), if your contract to purchase was entered into between May 31, 2012, and June 30, 2014. This concession is in addition to the first-home owners’ grant. If eligible, no stamp duty will be payable where the apartment has a market value of $500 000 or less. Where an apartment purchased has a market value greater than $500 000, the buyer will be entitled to a stamp duty concession of $21,330. A calculator is available on the RevenueSA.sa.gov.ua website to determine the stamp duty payable and concession that could be applicable. A partial concession will be available for contracts entered into between July 1, 2014, and June 30, 2016. South Australian first-home buyers of established homes are entitled to a $5,000 first home owner grant, which expires on June 30, 2014.
Despite the generous government incentives on offer, it was also the worst February new house sales on record (see next chart).
Rolling annual new house sales in South Australia also fell to their lowest level in the series’ history in February, with approvals also falling sharply (see next chart).
Western Australia:
A $7,000 first-home owner grant remains in place for a newly constructed or established home. It does not apply to vacant land purchased to build a new home. The total value of the home must not exceed $750,000 if the property is located south of the 26th parallel of South Latitude, or $1 million if located north of the 26th parallel of South Latitude. First-home buyers eligible for the $7,000 grant pay no stamp duty on homes valued up to $500,000 and up to $300,000 for vacant land.
Western Australia is the one brightspot for the housing industry, with both new house sales and approvals on the rise (see next chart).
I think it’s pretty clear that the majority of first home buyer (FHB) incentives for new dwellings have so far failed to inject life into sales or approvals. We don’t know the counter-factual of course, and perhaps sales would have been even more dismal than otherwise. The results also suggest that the RBA will have a great challenge trying to shift the economy to houses from holes as the mining investment boom fades.
Overall, the answer is as old as markets. There is no substitute for making urban fringe developments cheaper through reform to the planning and taxation regimes that inflate land costs, as well as better provision of housing-related infrastructure.
