A slowdown in the volume of new houses and apartments being sold throughout Australia has been confirmed amid a third straight month of softer data.
Releasing its New Home Sales report based on a survey of 100 large builders, Housing Industry Association says the seasonally adjusted number of new homes and apartments sold dropped by 6.1 percent in September to come in at around 5,800 – a far cry from the monthly volumes of 7,000 plus achieved during every month throughout calendar 2015 and 2016.
The third consecutive month of much softer figures, the data confirms what is now a clear trend of lower demand compared with the boom times of the past two years (see chart).
Indeed, sales of new homes have now contracted for nine out of the past twelve months.
Housing Industry Association Senior Economist Shane Garrett said the decline has been led by a drop in foreign buying activity.
He says foreign buyers were being put off by exorbitant transaction costs after several states imposed stamp duty surcharges on foreign buyers.
Transaction costs for foreigners now amounted to more than $100,000 on many homes in Sydney and also significant amounts on foreign purchases in Melbourne, Garrett said.
As well, he said a rough doubling in the multi-unit segment since its low point in 2012 has meant that new apartment buying activity would inevitably fall from considerable heights.
Not having risen so high, detached home sales were contracting but at a less pronounced rate.
In terms of detached home sales, Garrett said domestic investors are being impacted by stricter regulations put in place by the Australian Prudential Regulatory Authority (APRA) in respect of interest-only loans whilst relative softness in the overall economy was impacting confidence.
As well, population growth has eased since the early part of the decade,
In terms of states, Garrett says sales activity (and the pace at which residential building is coming in) would likely bottom out in states such as Western Australia and South Australia where softer conditions persist but would continue to contract off a high base in the busier states of New South Wales and Victoria.
Garrett said the peak of new home starts had passed, although the large number of homes already underway would keep builders busy for now.
“In terms of actual new dwelling construction, the peak has passed in terms of the number of starts,” Garrett said.
“A lot of those homes which have been started when home building was at record levels are still in construction. But we are, I would say, close to or over the peak.”