The HomeBuilder and First Home Buyer Subsidy stimulus has combined to drive new home sales to a decade high, according to the HIA:
“New Home Sales increased by a further 15.2 per in November to reach a decade high,” stated HIA’s Economist, Angela Lillicrap.
The HIA New Home Sales report – a monthly survey of the largest volume home builders in the five largest states – is a leading indicator of future detached home construction.
“Sales in the three months to November were 41.1 per cent higher than the same time last year,” added Ms Lillicrap.
“Sales nationally increased in November across the five states surveyed with a notable increase in the two largest states.
“Sales in Victoria rose 20.6 per cent as they emerged from stage four restrictions and a 15.9 per cent increase was recorded in New South Wales which has been lagging other jurisdictions.
“This data precedes the extension of HomeBuilder which was announced on 29 November 2020.
“The extension of HomeBuilder should see strong sales of new homes reach into 2021.
“HomeBuilder is not the only reason for the strength in New Home Sales, although it was the trigger for improved market confidence. Low interest rates, house price growth and a change in consumer preferences away from apartment style living, have all seen demand for detached housing rise. Many households have diverted their expenditure from travel and entertainment towards housing, including renovating their home.
“The strength of New Home Sales is a positive sign that home building will support the broader economy as we enter 2021,” concluded Ms Lillicrap.
Across the country, new home sales in the three months to November 2020 were higher in all regions when compared with the same period in 2019: Western Australia (108.8 per cent), South Australia (57.6 per cent), Queensland (34.0 per cent), Victoria (22.2 per cent) and New South Wales (20.7 per cent).
The National Housing Finance & Investment Corporation (NHFIC) this week forecast total net dwelling additions to rise to 181,000 in 2021 from 170,000 in 2020, driven by detached houses:
Accordingly, NHFIC forecasts new dwelling supply will exceed new demand by around 127,000 dwellings in 2021, and 68,000 dwellings in 2022, with cumulative new supply expected to be around 93,000 higher than new demand by 2025.
Thus, while these stimulus measures have successfully juiced construction today, they will leave a demand hole down the road.
Leith van Onselen is Chief Economist at the MB Fund and MB Super. He is also Chief Economist and co-founder of MacroBusiness. Leith has previously worked at the Australian Treasury, Victorian Treasury and Goldman Sachs.
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