Are FHB incentives firing new home sales?

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By Leith van Onselen

Today’s new home sales release from the Housing Industry Association (HIA) was a welcome reprieve from the string of lukewarm news flow published over the past few weeks.

At the national level, new home sales rebounded by 4.2% in March, with detached house sales rising by 3.9% and unit sales increasing by 5.6%. Total new home sales are now in a mild uptrend, having risen by 16% since sales bottomed in September 2012, driven primarily by a surge in unit sales (see next chart).

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While the recovery is welcome, it needs to be kept in perspective, with annual new home sales tracking only marginally (1%) above the 16-year lows recorded in December 2012 (see next chart).

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Importantly, the employment-sensitive detached house segment remains very weak, with annual sales in all major states, except Western Australia, tracking at or near record lows (see next chart).

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That said, there are tentative signs that the first home buyer incentives introduced in New South Wales and Queensland in October 2012 are beginning to bear fruit, with new house sales 45% higher than September in New South Wales, although they are basically unchanged in Queensland (see below charts).

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Overall, while there are some tentative signs of life in the housing construction sector, it does not yet appear to be enough to fulfill the RBA’s goal of housing construction filling the void left as the mining boom unwinds.

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About the author
Leith van Onselen is Chief Economist at the MB Fund and MB Super. He is also a co-founder of MacroBusiness. Leith has previously worked at the Australian Treasury, Victorian Treasury and Goldman Sachs.