Are FHB incentives firing new home sales?

ScreenHunter_01 Mar. 03 22.48

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).

ScreenHunter_06 May. 01 12.03

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).

ScreenHunter_07 May. 01 12.06

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).

ScreenHunter_08 May. 01 12.09

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).

ScreenHunter_09 May. 01 12.14
ScreenHunter_10 May. 01 12.14

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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Unconventional Economist
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  1. Leith, you must have borrowed the HIA’s microscope to see a new uptrend here.

    Has anything changed to suggest this is anything but noise?

    I feel very sorry for the tradies now fighting on price. If only they realised high land prices are the cause.

    Don’t Buy Now!

  2. If demand were FHB-related, I’d probably expect to see simultaneous improvement in both places.

    Leith, you might recall that a while back the long-standing situation of investors buying established housing almost exclusively suddenly changed, with investors beginning to dive into new housing in signifianct numbers for the first time.

    Have you ever investigated this rather sudden change in investor behaviour?

  3. How sad it is that the future of the Australian economy now rests on buying and selling houses. The once in a lifetime golden egg (i.e. mining boom) has broken and has started perishing in the sun. Now all we can hope for is that we construct more new houses at higher prices and resell existing houses for higher prices. All so we can buy ever more stuff to keep our service economy workers employed. And it looks like it might happen more quickly than anyone anticipated.

  4. Pfh007MEMBER

    With AV Jennings willing to build a simple 3 bedder – “Camilah” for $130K – there would be no shortage of demand providing the land price component was kept low – Katter Style (say $25K) with higher rates over 25 years.

    Hand up who thinks the construction industry would be run off their feet if FHB’s could buy a new house and land package for circa $155 K

    • Pfh007MEMBER

      What is even more perverse is that Sydney is still full of stone age fibro kits homes that the owners cannot afford to demolish and rebuild because they have already tapped out their debt carrying capacity by paying $500K to buy them.

      I know ‘heritage’ is an obsession for many but preserving vast suburbs of asbestos filled fibro is just insane.

      • Lol.. I hope the next season of The Block features a row of fibro houses and contestants in orange Hazmat suits.

        • Whether it does or not, we can be certain that the next lot of contestants will be just like the last – white, unskilled at manual labour, and DUMB.

          I’m surprised that Things Bogans Like never had an entry for “The Block”.

    • There would be zillions, For the life of me why there isnt an electoral party running candidates saying that is beyond me. (even if only a senate ticket – they would get members up).

      If you are into fibro houses I guarantee you Sydney is not alone. At the risk of the old Melb-Syd me too syndrome Melbourne does them too, and Hobart (even more so actually)

  5. If the black line in that first chart were a stock, I’d have been short since 2001 without getting stopped out. Not a higher peak or a higher trough in sight.

    Sorry, but I don’t see the “welcome reprieve”.

  6. The Patrician

    It is not so much the “new home” incentives that are crucial but the combination with the removal of the “pre-existing home” grant that makes the policy work.

  7. Has anyone noticed the inordinately large numbers of people flooding into the tax savings articles at fairfax to defend negative gearing?

    Usually the ratio of for and against would be completely reversed. While all the debunked myths are being dragged back out.

    Is a fearful industry mobilising an army of astroturfers?

    • Pfh007MEMBER

      The best cure for negative gearing is a functional land/housing market.

      Losing money will rapidly lose its appeal when asset prices revert to mean and any capital gains after that track inflation at best.

      Although I have no time for negative gearing I think it is symptom and not really a cause of the problem.

      No ‘credit’ and ‘supply constrained’ capital gains = no speculation = no negative gearing.

    • For sure it is, they see the 12B black hole in the budget and are in full panic mode, knowing full well that they are likely to be in the firing line, as they should be.


      Note that almost all the comments are regarding the removal of Negative Gearing, although it seems more people are now against it. There’s even a few comments referencing the work by Soos and MB.

      “It is time to get rid of Negative Gearing – and the latest figures show that it would be more like $12 billion saved, more than double the amount quoted. Calls for this to removed are absolutely correct! Philip Soos and Macrobusiness have clearly debunked the myths about Negative Gearing including the lie that rents went up in the mid 80s when it was temporarily removed.”

  8. Actually NG should only be allowed and supported for the PPOR only. Outright ownerships rates have decreased from 47% in 1970 to 32% now and that is the wrong direction to be heading. If we could get our OO rates up to high levels then capital would be spent/invested into the real economy.

    So keep NG, just move it to the PPOR only.
    PS – Need to bring in the land tax at the same time and make the PPOR subject to CGT if sold under 10 years. (exemptions for health, babies and work legit reasons to move)NO CGT if sold after 10 years and no stamps.

    • lol.. did I just post that into the wrong thread… my brian fart 🙂
      Mods remove at will…