Sales of new homes continued to decline in January, falling 12.8% for the month, leaving sales in the previous three months a remarkable 46.7% lower than the prior year.
This was according to the HIA New Home Sales report, a monthly survey of the largest volume home builders in the five largest states.
Tim Reardon, HIA’s chief economist, said sales of new homes have stalled in recent months as the RBA’s rate hikes continue to adversely impact market confidence.
“There is no indication that the market has reached the bottom of this cycle with sales falling in all states,” Reardon said. “A further increase in the cash rate in February is likely to see sales fall further.
“Without an improvement in access to finance, or a lowering of rates, building activity will start to contract from late this year. Many buyers have been forced from the market by the higher rates, but even those buyers unaffected by the RBA’s actions are unwilling to purchase given the economic uncertainty.
“There are long lags in this cycle given the large volume of building work underway which will obscure the impact of the rate rises on the wider economy. There is a risk that once the contraction in home building occurs, and slows activity across the rest of the economy, that it will prove difficult to stop.”
The HIA economist said there’s no need for the RBA to “crush the economy” in order to put inflation under control.
“The supply chain disruptions that caused the high inflation in recent years are easing for reasons unrelated to the RBA’s actionism,” Reardon said. “The focus of policymakers should be on other tools to address inflation, not simply interest rates. Interest rates are a poor tool for addressing inflation and fiscal policy measures have been shown repeatedly to be better at managing the risks of embedded inflation. The RBA isn’t going to return the economy to stability by putting the building industry through boom-and-bust cycles.”
For the three months to January, new home sales in NSW plunged 73.1% compared to the same period the previous year. This was followed by Queensland (-53.9%), Victoria (-41.6%), and Western Australia (-21.7%). South Australia has seen a 2% increase.
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