Stalling unit market drives down new home sales

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The sale of new homes in Australia suffered somewhat of a surprising fall during February, according to figures released yesterday.

According to the Housing Industry Association’s (HIA) latest New Home Sales Report, the sale of new dwellings fell by 5.3% during February, falling to below 20,000 for the first time since December last year.

The overall fall in February was felt across dwelling types, with detached house sales falling by 3.9%, while multi-unit sales declined by a sharper 10.6%.

Source: HIA

HIA chief economist Harley Dale said the February fall wasn’t desirable; however it doesn’t mean the bottom has completely fallen out of the new housing sector.

“This latest result is a larger than desirable fall. New Home Sales are losing some of their lustre as a downward trend becomes more firmly entrenched,” Dr Dale said.

“While the monthly result is a soft one, there is no need to loudly ring alarm bells as often seems to automatically occur every time an economic update disappoints,” he said.

While the monthly fall may not set alarm bells ringing, Dr Dale said it is important that key industry indicators such as new home sales aren’t ignored.

“New home sales are down, but far from out. Over the three months to February 2016, the sale of detached houses increased by 1.8%. The sale of multi-units nudged up by 0.8% over the same period,” he said.

“What we need to keep a watchful eye on are the signals that will shortly begin to emerge for 2016/17 from key leading housing indicators like new home sales and building approvals. Stage one of a down cycle in new home building will be moderate, but signs of a sharper contraction in subsequent stages may emerge as the year progresses.”

In the month of February 2016 detached house sales increased in by 1.7% in Victoria and by 1.8% in Western Australia. Detached house sales fell by 7.4% in New South Wales, 12.1% in Queensland, and 3.5% in South Australia.

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