Total new home sales in Australia fell for a second consecutive month in May 2016 but experts say it is cyclical downturn and nothing to worry about.
Total seasonally adjusted new home sales declined by 4.4% following a 4.7% fall in April 2016. The sale of detached houses fell by 6.7% but apartments were up by 4.9%.
The data also shows that detached house sales declined in three of the five mainland states with a fall of 11.5% in New South Wales, a fall of 8.2% in Victoria and a fall of 11% in Queensland. But detached house sales increased by 3.8% in South Australia and by 5.4% in Western Australia.
The figures should not cause alarm, according to the Housing Industry Association. ‘There is a cyclical downturn ahead for new residential construction activity, as new home sales signal, but the early pull-back will be mild by historical standards,’ said HIA chief economist Harley Dale.
‘We remain of the view that a decline in new dwelling commencements will gather momentum in 2016/2017 and 2017/2018, following four years of growth which has delivered enormous benefits to the broader Australian economy,’ he explained.
‘This economic benefit delivered by new home construction in recent years is unprecedented. It creates a platform for the Federal government to provide leadership on the key issues of new housing supply, affordability and home ownership, which will in turn benefit Australia’s economic growth and future standard of living,’ he added.
Meanwhile the HIA’s regular review of Australia’s $30 billion home renovations market show that the sector is very much in recovery mode with 2015 marking the second consecutive year of growth. This followed a deep slump during the early years of the decade.
The Renovations Roundup report projects that renovations activity will increase by 2.5% this year with growth of 1.7% forecast for 2017. The HIA also projects that activity will grow by 2.8% in 2018 followed by a 2% increase in 2019, bringing the total volume of renovations activity to $33.30 billion.
According to Shane Garrett, HIA senior economist, the recovery in renovations activity is being supported by the environment of remarkably low interest rates and very strong dwelling price growth in key markets.
‘In this context, many home owners have decided to shelve plans to move house and instead conduct major renovations work on their existing homes. The large pool of available home equity has made this possible,’ he explained.
‘However, the pace is growth is being held back by the weakness of earnings growth in the economy and the fragile condition of consumer sentiment. The importance of home renovations activity is often underestimated and it accounted for about 35% of total residential construction during 2015,’ he said.
‘With new home building set to decline over the coming years, the expansion of the renovations market means that its importance will only increase. The revival in renovations activity will provide a welcome offset to the more challenging situation emerging on the new home building side of the industry,’ he added.
