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New home sales boomlet ends
Topic Started: 28 Aug 2014, 10:53 PM (381 Views)
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A downward trend in total new home sales has emerged, affirming previous calls that sales had reached a peak earlier in 2014. The 2013/14 financial year saw the recovery in new home sales gather strong momentum. The 2014/15 financial year, however, has started with the emergence of a downward trend, suggesting that monthly new home sales peaked back in April.

Total seasonally adjusted new home sales fell by 5.7 per cent in the month of July 2014, a result reflected in both detached house as well as multi-unit sales. Detached house sales declined by 4.7 per cent, while multi-unit sales fell by 10.9 per cent in the month of July. Over the three months to July aggregate new home sales declined by 3.5 per cent.

We have canvassed the likelihood of a cyclical peak for leading indicators of new dwelling construction activity in previous editions of the New Home Sales Report. The breakdown of the sector in terms of dwelling type and location are key considerations to how the remainder of the cycle will unfold, with new home sales providing some insights in this regard.

Firstly, there is the compositional breakdown. While sales in the multi-unit segment appear to have peaked in late 2013, lagged growth continued to occur in detached house sales well into 2014, with a peak only occurring in April this year. The key now will be to observe some form of consolidation of improved sales levels in the detached house segment; while the trend decline in the multi-unit segment could either continue for some time yet, or levels could ‘settle’ around a historically elevated average for a period.

Secondly, there is the geographical breakdown. The states that spearheaded the recovery in new house sales – New South Wales and Western Australia – appear to be handing on the reigns to other states, namely Queensland (notwithstanding a pause in momentum that has occurred in recent months) and South Australia. Sales in Victoria, meanwhile, have been tracking sideways at reasonably healthy levels. We expect actual aggregate detached house building activity in 2014/15 to largely consolidate the gains achieved in the previous year in accordance with these general geographical dynamics.

In the month of July 2014 detached house sales increased by 4.1 per cent in SA and by 3.1 per cent in NSW. Detached house sales fell by 9.3 per cent in Victoria, 7.1 per cent in WA and 6.5 per cent in Queensland. Over the three months to July 2014 detached house sales declined in each of the surveyed states, albeit to varying degrees. Sales fell by 5.4 per cent in SA, 4.4 per cent in WA, 3.6 per cent in NSW, 2.3 per cent in Victoria and 0.7 per cent in Queensland.
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