Sales of off the plan or new homes are continuing to slide as consecutive rises in interest rates are beginning to cool demand for new housing construction from recent boom levels, new data shows.
But activity remains at respectable levels by historic standards.
And builders and tradespeople are set to remain busy as the industry works its way through a massive number of projects which have been started during the recent boom.
The Housing Industry Association has released its HIA New Home Sales report – a monthly survey of the largest volume home builders in the five largest states.
The report is considered a leading indicator of future detached home construction.
According to the report, new home sales fell by 1.6 percent in August in seasonally adjusted terms.
This follows a 13.1 percent drop in new home sales in July.
At a result, new home demand is back to pre-pandemic levels (see chart) – albeit with levels remaining respectable by historic standards.
Housing Industry Association Senior Economist Tom Devitt said that builders are likely to remain busy into 2023 on account of the pipeline of existing work commenced during the recent boom.
But he cautioned that about a risk that the Reserve Back will go too far, too soon on interest rate rises.
“Sales of new homes over the past two months are reflective of a slowing in the market as the impact of the rise in the cash rate hits households,” Devitt said.
“This rise in borrowing costs compounds the impact of the rise in the cost of construction.
“The full impact of recent and future rate increases will continue to flow through as an adverse impact on the sale of new homes in coming months.
“There remains a significant volume of work under construction and approved-but-not-yet-commenced that will provide a buffer for the industry and ensure building activity and demand for skilled trades remains exceptionally strong through the rest of 2022 and into 2023.
“The concern remains that that the adverse impact of rising rates on the wider economy will be obscured by this volume of ongoing work and that the RBA goes too far, too soon.”