New home sales crash to earth after HomeBuilder

The unprecedented boom in new home sales has ended following the expiry of the Morrison Government’s HomeBuilder subsidy at the end of March.

According to new data released by the Housing Industry Association (HIA), new home sales have roughly halved from March and are tracking way below the December peak (when HomeBuilder subsidies were initially reduced):

New home sales

New home sales have fallen sharply post HomeBuilder.

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Nevertheless, new home sales were still 2.9% higher than the same time in 2019, suggesting demand remains solid despite the reduction of subsidies.

The new home sales data is mirrored somewhat by the ABS’ new home finance data, which fell for the second consecutive month by a combined 21% from February’s peak:

New home finance

Loans for dwelling construction are falling fast post-HomeBuilder.

Despite the falls, the HIA expects new home construction to remain hot in 2021:

“A record number of new homes are expected to commence construction in 2021. The low interest rates and confidence in the housing market are continuing to facilitate demand”.

The ABS’ dwelling approvals data certainly supports this view. Detached house approvals are running well above the historical average, offsetting recent heavy falls in apartment approvals:

Annual dwelling approvals

Massive lift in detached house approvals.

Therefore, dwelling construction should remain strong for the remainder of this year given approvals lead commencements and completions.

The big slowdown will likely come in 2022 as the pull forward of demand from HomeBuilder ends.

Unconventional Economist

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