Sales of new homes around Australia have fallen in June in the latest sign that the downturn in new home construction is deepening.

Housing Industry Association has released the latest monthly edition of its HIA New Home Sales report – a monthly survey of the largest volume home builders in the five largest state.

The report is a leading indicator of future detached home construction.

According to the report, sales of new homes fell by 4.8 percent in June.

Year on year, June monthly sales are down by 33.2 percent – albeit from a historically elevated base.

New home sales are now sitting at very low levels (see chart).

This means that activity in detached house starts and construction will likely be subdued over the near term.

Housing Industry Association Chief Economist Tim Reardon said the slowdown reflects the rapid rise in interest rates.

He says this will begin to affect the volume of work under construction from the latter part of this year.

“The rise in the cash rate over the past year has seen a significant decline in the volume of new homes sales,” Reardon said.

“This will result in the least number of new homes commencing construction for more than a decade in 2024.

“The last year has seen the impact of a 4 per cent increase in the RBA’s cash rate filter through to the new home market, compounding the impact of soaring construction costs across the industry.

“A significant number of existing projects are also being cancelled, as buyers find themselves unable to obtain finance after interest rates and construction costs continued upwards since they signed the contract.

“This lack of new work entering the pipeline will result in fewer projects being commenced, and the volume of work under construction shrinking rapidly from late this year.”

 

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