The Housing Industry Association’s (HIA) new home sales report is out, with sales falling another 1.6% in August, which follows July’s 13.1% decline:
Aussie new home sales trending lower.
According to the HIA, “July and August represent the weakest pair of months for new home sales since the lockdowns in 2021” and are “reflective of a slowing in the market as the impact of the rise in the cash rate hits households”.
The HIA also warned that sales would continue to fall “in coming months” as “the full impact of recent and future rate increases flow through”.
The slowdown in new home sales is also reflected in Australian Bureau of Statistics (ABS) construction finance data, which collapsed 58% from their HomeBuilder-induced peak in July:
New home construction loans fall back to earth.
The impact of the declines in new home sales and loans will take some time to flow through to the economy, however, given there is a large pipeline of unfinished homes currently under construction. As noted by the HIA:
“There remains a significant volume of work under construction and approved-but-not-yet-commenced that will provide a buffer for the industry and ensure building activity and demand for skilled trades remains exceptionally strong through the rest of 2022 and into 2023″.
“The concern remains that that the adverse impact of rising rates on the wider economy will be obscured by this volume of ongoing work and that the RBA goes too far, too soon”.
Therefore, actual dwelling construction activity will remain high for the foreseeable future.
The downturn will likely arrive mid next year once the homes currently under construction are completed. By then, the housing industry will likely be in recession.
