The HIA New Home Sales report, a monthly survey of the largest volume home builders in the five largest states, has reported a decline of 15.7% in the three months to September.
HIA chief economist Tim Reardon says: “This data produced the weakest quarter since June 2020, when the national lockdown drove Australia into its first recession in almost 30 years.”
New home sales fell in the month of September, for the third consecutive month, by a further 4.2%, reflecting the increasing weight that the RBA’s tightening cycle is placing on home buyer borrowing capacity, he adds.
“The RBA increased the cash rate again in October, and this will further accelerate the decline in new home sales. 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,” he says.
Tim believes that the full impact of the rise in the cash rate is yet to emerge.
He says the latest data shows that home building is past the pandemic peak and is set to experience a long COVID slowdown, saying that given the longer than usual lags in the building cycle, the RBA’s rate hikes will similarly take longer to affect the broader economy.
“Much of the impact of the RBA’s tightening cycle will be obscured 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. This could result in them weighing too heavily on household finances and jeopardising the housing industry’s future soft landing,” concludes Tim.
For the three months to September 2022, compared to the previous quarter, most states declined under the weight of interest rates. Victoria led the declines, down by 20.8%, followed by Queensland (-17%), New South Wales (-16.3%) and Western Australia (-10%). South Australia saw the only increase, up by 6.6%.