2024 set to wreak havoc on home building

According to the report, the sale of new homes across Australia fell by 2.4 per cent in July, and is a leading indicator of future detached home construction.

Tom Devitt, HIA’s senior economist, acknowledged that the latest decline “leaves sales in the three months to July 2023 down by 33.4 per cent compared to the same period in 2022”.

“Weak new home sales, together with an elevated number of previous sales being cancelled, reinforce the expectation that Australia will see a decade-low level of home building next year,” he warned.

And while some spectators would raise the potential for future rate cuts that could see the trend reverse, Mr Devitt isn’t so optimistic, arguing that “even a cut to the cash rate now would not produce a recovery in new house commencements until the second half of 2024”.

“Underlying demand for housing continues to be supported by population growth, acute shortages of rental accommodation and strong employment figures,” the economist continued.

“Meeting the appropriate levels of new housing for Australia’s current and future population will require changes to the other policies that inflate construction costs. These are not only interest rates, but also tax settings, land release and planning reforms, and macro-prudential rules that squeeze out owner-occupiers and investors alike.”

One silver lining though, is the national cabinet’s recent announcement to increase its housing supply targets over the coming five years.

“[It’s] a welcome step in the right direction,” the economist commented.

“Coordination among all levels of government and the industry will be crucial to achieving this goal,” he continued.

According to the report, Queensland saw the largest decrease over the month of July 2023.

New home sales were down by -11.6 per cent in the Sunshine State, followed by Western Australia, where new home sales were down -9.3 per cent.

In NSW, new home sales were down -1.6 per cent while in Victoria they were down by -0.6 per cent.

South Australia was the only state to buck the trend – with new home sales up plus-35.5 per cent.

Looking to the figures over a three-month period and comparing them to the same period in 2022, Queensland home sales had dropped -52.3 per cent, while NSW numbers were down -48.4 per cent.

Victoria was also down by -37.2 per cent, while South Australian numbers were down by -26 per cent.

The only state to buck the trend for the quarter was Western Australia, where sales were up by more than 17.3 per cent over the same period in 2022.

Compared to the previous month, sales in July 2023 decreased in most of the large states, led by Queensland (-11.6 per cent) and followed by Western Australia (-9.3 per cent), NSW (-1.6 per cent) and Victoria (-0.6 per cent). South Australia was the only state to see an increase (over 35.5 per cent).

Similarly, sales in the three months to July 2023 decreased compared to the same period in 2022 across most of the large states. This was led by Queensland (-52.3 per cent), followed by NSW (-48.4 per cent), Victoria (-37.2 per cent) and South Australia (-26 per cent). Sales in Western Australia, on the other hand, increased by 17.3 per cent.