Australia’s residential construction industry has been given some reasonably good news, with the latest data showing a modest increase in new home sales.

But sales volumes remain very low compared with recent history.

In its latest report, Housing Industry Association has provided an estimate of new home sales activity based on a survey of the nation’s largest volume home builders across Australia’s five largest states.

The report is considered to provide a leading indicator of future levels of construction in the detached house segment of the market.

According to the report, the number of new homes that were sold throughout Australia edged up by 5.3 percent in February.

However, sales volumes remain extremely low when compared with recent historic standards (see chart).

The data comes as other recently released data suggest that activity relating to both building approvals and housing construction lending is near its lowest level over the past decade.

Put together, the data sets indicate that the pace at which new residential work is coming in remains very slow by recent historic standards.

This points to a subdued outlook for dwelling construction starts and building activity across the early to middle part of this year.

Housing Industry Association Chief Economist Tim Reardon said the report pointed to a subdued outlook for residential construction.

Reardon warns that the flow on impacts in terms of the economy and housing supply will be significant.

“Despite the increase in February, sales remain around the low levels that prevailed in the second half of 2023,” Reardon said.

“The slowdown in sales is caused primarily by the rise in the cash rate which has eroded the capacity of households to borrow and impaired market confidence.

“The slowing in sales and building approvals will flow through to a decade low volume of new houses commencing construction in 2024. The economic impact of this slowdown will become increasingly evident in 2024, as employment in the home building industry falls.

“The higher borrowing costs are compounding the elevated cost of land and construction, drying up the pipeline of new home building work despite the significant pent-up demand for housing.”

In terms of states, new home sales rose in February across Queensland (+8.4 percent), New South Wales (+6.5 percent), Victoria (+6.3 percent) and Western Australia (+5.0 percent).

Only one state (South Australia) saw a decline in February (-5.5 percent).

Over the three months to February 2024, new home sales were stronger compared to the previous year in Western Australia (+39.9 percent), Queensland (+20.4 percent) and New South Wales (+16.0 percent).

Year on year declines were recorded in Victoria (-7.7 percent) and South Australia (-13.9 percent).


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