Tighter lending policies have stoked the decline, says economist
New house sales fell by 4.4% in May, according to the latest HIA New Home Sales Report. NSW experienced a -6.8% in new house sales, Queensland a -5%, Victoria a -4.6%, Western Australia a -2.4%, and South Australia a -0.2%.
As a monthly survey of the largest volume home builders in the five largest states, the report provides early signs of trends in the residential building industry.
“Access to finance has become the barrier to ongoing growth in home sales,” HIA principal economist Tim Reardon said in a statement. “The availability of credit has tightened over the past 12 months with banks responding to the decline in house prices and the banking royal commission by limiting lending to new home buyers.”
For the first time, sales are declining in Melbourne due to the slowing population growth that resulted from tighter visa requirements for inward migration. Exceptionally strong over a number of years, the city’s new market now experiences “a very modest slow-down in activity”, according to Reardon.
Melbourne’s market conditions may be slowing, but its building activity remains strong given the very large volume of pending work. “The impact of the tighter constraints on finance will ease over the year,” Reardon said. “In fact, we are expecting detached house starts to rise slightly in 2018 following the 2.8% decline that occurred in 2017.”
He added that beyond the temporary lift, people can “expect the downturn in detached house building to take root in 2019 — and house sales appear to be providing a very early indication of this occurring.”
