Prospective buyers abandon their plans as rate rises continue to bite
Rising interest rates have stymied momentum in the housing market as new house sales tumbled 15.7% in the three months to the end of September, according to new data from the Housing Industry Association.
September was the third straight month to see a drop in new home sales, the HIA reported.
“New homes sales declined by 15.7% in the three months to September, compared to the previous quarter,” HIA chief economist Tim Reardon said.
The HIA found that the Reserve Bank’s interest rate hikes and the increasing cost of construction drove more people to abandon their intentions to buy new homes, The Australian reported.
Most states saw falls in sales in the three months to the end of September, with Victoria (down 20.8%) seeing the biggest decline, followed by Queensland (-17%), New South Wales (-16.3%) and Western Australia (-10%). Only South Australia saw sales increase, up 6.6% for the quarter.
“This data produced the weakest quarter since June 2020, when the national lockdown drove Australia into its first recession in almost 30 years, [and] reflects the increasing weight that the RBA’s tightening cycle is placing on home buyer borrowing capacity,” Reardon told The Australian. “The RBA’s most acute tightening cycle in almost 30 years is occurring at the same time as the industry is experiencing the fastest increase in home-building costs in almost 50 years. These … forces will see sales continue to slow, and the full impact of the rise in the cash rate is yet to emerge.”
Read next: Prepare for a 20% house-price drop – experts
With longer-than-usual lags in the building cycle, Reardon told The Australian that the full impact of the RBA’s rate hikes would likely not be seen until the second half of next year.
“These treacherous lags will force the RBA to wait longer to see the easing in price pressures that it desires,” he said.
