Sales of new homes have continued to fall sharply following the fastest cash rate hike in a generation, according to Tim Reardon, HIA chief economist.
The HIA New Home Sales report, a monthly survey of the largest volume home builders in the five largest states, showed that the sales of new homes dropped by 4.6% in December, which led to a remarkable 42% dip in sales in the final quarter of 2022 compared to the same period in 2021.
“This slowing in sales will flow though to a slowdown in building activity in the second half of 2023,” Reardon said. “When this hiking cycle began, there was a significant pipeline of home building work under construction, and many more projects yet to even begin construction. This has created a significant lag in the RBA’s impact on employment across the economy.
“The rise in the cash rate has also seen many recent buyers of new homes unable to finance their new project. This resulted in one in five recent new home buyers having to cancel their new home building contract as their access to finance was reduced by the rise in the cash rate.”
The HIA chief economist said that with one in five customers cancelling their new home building project each month, the pipeline of building work will be eroded quickly.
“Once this pipeline of new home construction work is exhausted, the full impact of the RBA’s rate increases will become apparent,” Reardon said. “This is expected to occur in the second half of 2023.”
To avoid an unnecessarily sharp downturn in building activity, he said it is necessary that there will be a cut in the cash rate in 2023.
“The RBA will not restore the economy to stable growth by putting the housing industry through boom-and-bust cycles,” Reardon said.
For the December quarter, compared to the same period in 2021, new home sales in NSW were down by 66.7%, followed by Queensland (-49.9%), Victoria (-36.4%), and Western Australia (-30.9%). Only South Australia saw an increase, up by 13.9%, HIA reported.
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