Demand for new home construction continues to fall across Australia as the effect of rising interest rates continues to flow through, new data shows.

Released by Housing Industry Association, the HIA New Home Sales report – a monthly survey of the largest volume home builders in the five largest states – is a leading indicator of future detached home construction.

All up, the data says that on a seasonally adjusted basis, the volume of new detached homes sold slumped by 12.8 percent in January.

As a result, sales over the three months to January were a whopping 46.7 percent lower compared with the three months to January last year.

The data comes as the Reserve Bank of Australia raised interest rates for the nineth consecutive time earlier this month and has indicated that further rises may be needed to contain inflation.

Housing Industry Association Chief Economist Tim Reardon warns that the latest data does not yet reflect the full impact of the current rate increases.

He says building activity will contract from the latter part of the year.

“Sales of new homes have stalled in recent months as the adverse impact of the RBA’s rate increases continue to erode market confidence,” Reardon said.

“There is no indication that the market has reached the bottom of this cycle with sales falling in all states. 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.”

 

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