The Housing Industry Association (HIA) has released new home sales data for the month of July, with sales plunging 13.1%:
New home sales dive as rate hikes bite.
Commenting on the result, HIA Chief Economist Tim Reardon noted that the decline in sales reflects the impact of the recent increases in the cash rate by the Reserve Bank of Australia, with builders reporting less enquires and visits to display sites:
“The rise in the cost of borrowing will compound the impact of the rapid increase in the cost of building a new home that occurred due to the constraints on global supply chains”.
“The full impact of the rate increases will continue to flow through as an adverse impact on the sale of new homes for at least the next few months”.
“This slowdown is consistent with reports from builders over recent months which have seen the number of people visiting display sites and making enquiries slowing since the first increase in the cash rate in May”.
“If this decline in sales is sustained, which is expected, then the 1.75 per cent increase in the cash rate so far, will have brought this pandemic building boom to an end”.
Separate housing finance data from the Australian Bureau of Statistics (ABS) also shows that loans for construction and the purchase of new dwellings have plunged from their pandemic peak:
However, the ABS data is only current to June. Therefore, it does not include the July and August 0.5% rate hikes.
On the plus side, the pipeline of houses under construction has swelled to all-time highs, suggesting builders will remain busy for the foreseeable future:
Dwelling construction pipeline bulges.
However, because many builders have signed fixed price contracts, and input costs have ballooned, many are actually losing money on every home that is built.
Accordingly, dozens of major builders have gone into liquidation this year, making this a “loss-making boom” for the industry.
