New home sales in Australia’s largest states hit their lowest level since October 2013, with sales sliding in both the detached house and multi-unit sides of the market, according to the latest HIA New Home Sales Report.
New homes sales declined by 6.9 per cent in June compared with the previous month and were 11.9 per cent lower than the same time last year.
HIA Senior Economist Shane Garrett said the results support HIA’s forecasts that new dwelling commencements will continue to ease until late 2018.
“These results support HIA’s latest set of forecasts that new dwelling commencements are set to continue easing until late 2018. The reduction in sales of both detached houses and multi-units during the month of June continues the trend underway since sales peaked in early 2015.
“The fall in sales needs to be considered against the backdrop of residential building coming off a record peak of activity in 2016. We project that residential building will still be operating at a historically high level,” Mr Garrett said.
The reduction in new home sales during June 2017 was comprised of a 5.8 per cent reduction in new detached house sales and a 10.7 per cent fall in new multi-unit sales.
There were considerable differences in sales in June around the states, with new detached house sales rising both in Victoria (+4.1 per cent) and Western Australia (+21.1 per cent). However, sales fell in New South Wales (-9.7 per cent), Queensland (-29.3 per cent) and South Australia (-23.7 per cent) during the month.
The HIA’s most recent Affordability Index shows affordability in Australian housing continued to decline in the June quarter this year. This is largely due to a rise in the median dwelling price of 9.1 per cent to a record high of $540,200. Sydney tops the list with the most unaffordable properties.
Mr Garrett said the growth in house prices in the quarter outstripped the growth in wages, resulting in the deterioration in affordability. As a consequence of these factors the Affordability index for Australia dropped by 0.3 per cent in the June 2017 quarter.
“NSW was the most significant negative influence on this result, with affordability in Sydney now declining past a critical level (Sydney – 0.7 per cent and the rest of NSW – 2.2 per cent).
“Acquiring and servicing a mortgage on a house in Sydney now requires more than two standard Sydney incomes. Sydney is the only market to have achieved this outcome in the 15-year history of this report.
“Affordability in Melbourne improved marginally in the quarter but remains 6.0 per cent less affordable than this time last year.”
On the positive side, during the June 2017 quarter affordability improved in six of the eight capital cities. The largest improvement occurred in Darwin (+4.3 per cent), followed by Adelaide (+2.9 per cent), Hobart (+1.6 per cent), Brisbane (+1.0 per cent), Canberra (+0.8 per cent) and Melbourne (+0.8 per cent).
Of the capitals where affordability worsened, the biggest deterioration was in Perth (-1.3 per cent) and Sydney (-0.7 per cent). The Perth deterioration in affordability appears to contradict the soft conditions in that market, but the fall in average wages in Perth in the quarter outweighed the positive impact on affordability from the falls in home prices.
The HIA Affordability Index is produced quarterly and uses a range of data, including wages, house prices and borrowing costs, to provide an indication of the affordability of housing. A higher index result signifies a more favourable affordability outcome.
