New home sales stumbled in February, following four consecutive months of growth, said the Housing Industry Association, the voice of Australia’s home building industry.
The HIA New Home Sales report, a survey of Australia's largest volume builders, showed that total seasonally adjusted new home sales fell by 5.3 per cent in February, reflecting a 4.0 per cent reduction in detached house sales and an 11.0 per cent drop in multi-unit sales.
“These data are disappointing in the context of the growth in sales over previous months,” said HIA Senior Economist, Shane Garrett. “The broadly based decline in activity during February is a reminder of how delicate the nascent recovery in the housing industry really is,” added Shane Garrett.
“If we take a broader view of the situation, the overall direction of activity is still quite encouraging,” commented Shane Garrett. “New home sales are up strongly over the last three months in almost all states, in terms of both houses and multi-units,” said Shane Garrett.
“Nonetheless, February’s data emphasise how far housing market activity has fallen from the levels of just three years ago. The industry is struggling in the current economic environment and strong policy measures will be required to bring market activity back up to levels consistent with Australia’s long term requirements,” concluded Shane Garrett.
In the month of February 2013 detached house sales fell by 13.7 per cent in Victoria, 2.8 per cent in New South Sales and 6.7 per cent in South Australia. Increases in detached house sales occurred in both Western Australia (+1.9 per cent) and Queensland (+0.8 per cent) during February.
Australia's new homes market has suffered a setback on its mooted road to recovery, with sales falling for the first time in four months.
New home sales slid 5.3 per cent nationally in February, driven by sharp falls in Victoria and South Australia, according to the Housing Industry Association.
The New Home Sales report, which is based on a survey of the country's largest volume builders, also found that unit sales were down 11 per cent compared to 4 per cent for detached homes.
“The broadly based decline in activity during February is a reminder of how delicate the nascent recovery in the housing industry really is," HIA economist Shane Garrett said.
While house prices are now clearly rising, they still (on average) sit below replacement cost. This means there is very little incentive for buyers to build, and they will continue to prefer existing (better value) stock. They will continue to do this until existing house prices rise enough to justify new builds.
All of the data we see today sits very comfortably with the idea house prices have been below replacement cost since 2010/2011.
If the RBA wants a contruction cycle to replace the mining cycle, house prices need to rise further. That may mean more rate cuts to come.
While house prices are now clearly rising, they still (on average) sit below replacement cost. This means there is very little incentive for buyers to build, and they will continue to prefer existing (better value) stock. They will continue to do this until existing house prices rise enough to justify new builds.
All of the data we see today sits very comfortably with the idea house prices have been below replacement cost since 2010/2011.
If the RBA wants a contruction cycle to replace the mining cycle, house prices need to rise further. That may mean more rate cuts to come.
Precisely.
Any expressed market opinion is my own and is not to be taken as financial advice
While house prices are now clearly rising, they still (on average) sit below replacement cost. This means there is very little incentive for buyers to build, and they will continue to prefer existing (better value) stock. They will continue to do this until existing house prices rise enough to justify new builds.
All of the data we see today sits very comfortably with the idea house prices have been below replacement cost since 2010/2011.
If the RBA wants a contruction cycle to replace the mining cycle, house prices need to rise further. That may mean more rate cuts to come.
why the previous 4 mths of growth then?
That doesn't make sense b_b - not even in your world.
Whenever you have an argument with someone, there comes a moment where you must ask yourself, whatever your political persuasion, 'am I the Nazi?'
While house prices are now clearly rising, they still (on average) sit below replacement cost. This means there is very little incentive for buyers to build, and they will continue to prefer existing (better value) stock. They will continue to do this until existing house prices rise enough to justify new builds.
All of the data we see today sits very comfortably with the idea house prices have been below replacement cost since 2010/2011.
If the RBA wants a contruction cycle to replace the mining cycle, house prices need to rise further. That may mean more rate cuts to come.
I agree with you about the replacement cost and think that new homes represent poor value (amenity wise) compared to existing. However, the sluggish performance of the housing market in general the past few years is probably more indicative of affordability issues. Sales of existing stock have also plumbed lows in recent times. So your call that rising prices will lead to more people building has some merit but a better solution would be to reduce the cost of new builds.
This replacement cost argument is fucking horseshit.
Did house prices double in Perth because the replacement cost doubled?
Its land that is the main cost and land can defalte in value just as quickly as it inflates.
Property acquisition as a topic was almost a national obsession. You couldn't even call it speculation as the buyers all presumed the price of property could only go up. That’s why we use the word obsession. Ordinary people were buying properties for their young children who had not even left school assuming they would not be able to afford property of their own when they left college- Klaus Regling on Ireland. Sound familiar?
The evidence of nearly 40 cycles in house prices for 17 OECD economies since 1970 shows that real house prices typically give up about 70 per cent of their rise in the subsequent fall, and that these falls occur slowly. Morgan Kelly:On the Likely Extent of Falls in Irish House Prices, 2007
This replacement cost argument is fucking horseshit.
Did house prices double in Perth because the replacement cost doubled?
Its land that is the main cost and land can defalte in value just as quickly as it inflates.
You really need to moderate your language if you wish to engage in intelligent conversation.
b-b is perfectly correct, the lack of building is the result of the cost of building new houses including the cost of acquiring and developing land into a form suitable for building a house on, after paying all necessary government dues, many of which did not exist 15 years ago.
Your chart shows the land cost rising from ~60% to ~70% of the total cost since ~1997. Is that a big deal? It is only since 1997, in most areas, that 10% GST has been added, and massive infrastructure charges and other charges have been directed at house building.
In one area of Queensland that I know, typical 1000 sqm building plots with services were available in 2001/2 for $50k/$70k. By 2007 the price of similar plots had risen to over $200k due entirely to the 3 tiers of government introducing new charges. It was no longer possible for a developer to get the plots to build ready status for less price,.
If you are genuinely interested I suggest you put some effort into determining the changes in government charges on developers since 1997. Your denial of the replacement cost argument is based on your absolute ignorance and preference for an irrational self-serving belief in a crash which you hope will get you a house cheaper than others have paid and are paying.
land can defalte in value just as quickly as it inflates.
Not really, once taxes are introduced they're rarely removed, govt gets addicted to the extra revenue and can't give it up, land costs will stay high or keep getting higher because govts will keep gouging.
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