New home sales remained restrained in February, with only a 1% increase across the nation against a downward trend that has been evident since two years ago.

“New home sales had been at elevated levels for a number of years until they began to cool at the end of 2017. More recently, the market has entered a significant downturn as other factors – regulatory restrictions, credit squeeze, and falling market confidence – have accelerated this downturn,” said Tim Reardon, chief economist at the Housing Industry Association (HIA).

Sales for the three months to February are 18.1% lower than at the same time in 2018. Approvals for new homes — an indicator of new home sales—revealed that the market is 8.1% lower than in the same three-month period last year.

The lower levels of sales and approvals mean that building works in the pipeline are rapidly being completed.

“This downward cycle is still expected to trough well above the long term average as long as the effects of the credit squeeze start to moderate and sales pick up over the course of 2019,” said Reardon.

The HIA report for February also found that there was an increase in new home sales compared to the past month across Victoria (2.5%), South Australia (7.5%) and Western Australia (5.1%). Queensland posted the biggest, with a decrease of 5.5% in home sales.  On the other hand, New South Wales saw a moderate decrease of 1.7%.

The HIA New Home Sales report is a monthly survey of the largest volume home builders in the five largest states and provides an early indication of trends in the residential building industry.