Today’s new home sales release from the Housing Industry Association (HIA) was welcome respite from the stream of tepid news flow reported over the past few weeks.
Following last month’s 4.2% increase, new home sales nationally rose by a further 3.9% in April, with detached house sales increasing by 6.7%, partly offset by a -9.5% decline in unit sales. Total new home sales are now in a mild uptrend, having risen by 21% since sales bottomed in September 2012, driven primarily by a surge in unit sales (see next chart).
While the recovery is promising, it needs to be kept in perspective, with annual new home sales tracking only marginally (2%) above the 16-year lows recorded in December 2012 (see next chart).
Importantly, the employment-sensitive detached house segment remains very weak. Despite the recent pick-up, annual sales in all major states, except Western Australia, are tracking near record lows (see next chart).
First home buyer incentives introduced in New South Wales and Queensland in October 2012 also appear to be having mixed results. While new house sales are 57% higher than September in New South Wales, they have fallen by -4% in Queensland (see below charts).
While today’s new home sales figures suggest there are tentative signs of life in the housing construction sector, it does not appear to be anywhere near enough to fulfill the RBA’s goal of housing construction filling the void left as the mining boom unwinds. If anything, today’s ABS data on construction work done added to the bear case, with the value of residential home building falling by -1.0% over the March quarter, disappointing analyst’s expectations and seemingly stalling the nascent recovery in dwelling construction (see next chart).
As argued many times over the past year, the RBA’s housing rebalancing plans are likely to remain a forlorn hope as land/house prices remain excessively high and households are carrying too much debt.
