The housing market is continuing to strengthen, and looks set to take over from mining investment as the main driver for economic growth in the coming year.
New home sales were up 1.2 per cent in June, seasonally adjusted, and were up two per cent in the June quarter, the Housing Industry Association (HIA) said on Tuesday.
CommSec economist Savanth Sebastian said economic growth was shifting from the mining boom states of Western Australia and Queensland to states where home construction is the strongest, such as NSW.
“It is very likely that home building and home renovations will be the linchpin of the Australian economy growth story over the coming year,” he said.
“While there are signs of a consolidation in housing activity, but new home sales are up almost 14 per cent on a year ago.”
Mr Sebastian said the positive data was unlikely to change the Reserve Bank of Australia’s current position of keeping the cash rate unchanged for the coming months.
He said a rate hike in December or early in 2015 was a possibility.
“Interest rates are at 54-year lows and the Reserve Bank needs to judge when is the appropriate time to move from stimulatory monetary policy to more neutral settings,” Mr Sebastian said.
HIA chief economist Harley Dale said new home sales were strong across Australia with four out of the five mainland states recording increases.
“The new home building sector will provide a healthy contribution to broader economic growth in 2014/15,” he said.
However, Dr Dale said, a lack of land to build apartment blocks could dampen new home sales growth in the coming months.
“As the recovery enters its third year, the magnitude and duration of the current new home building upcycle is less certain,” he said.
“The share of medium- to high-density construction is higher and there are considerable delays occurring in the availability of titled land for detached and semi-detached housing.”
Sales of flats, townhouses and semi-detached houses were up 15.9 per cent in June while sales of new detached houses fell one per cent.