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The Housing Industry Association has cited the royal commission’s impact on bank lending policies as a contributing factor in the continued slide of new house sales in 2018.
HIA’s principal economist, Tim Reardon, said that the first half of 2018 has seen a renewed downward trend in new house sales, which declined by 4.4 per cent in May and are now 12.8 per cent lower than the most cyclical high in December last year.
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“Access to finance has become the barrier to ongoing growth in home sales,” Mr Reardon said.
“The availability of credit has tightened over the past 12 months, with banks responding to the decline in house prices and the banking royal commission by limiting lending to new home buyers.
“Australia’s population growth has slowed over the past three quarters in response to tighter visa requirements that have constrained inward migration.”
Mr Reardon observed that for the first time in this cycle, the HIA is seeing sales declining in Melbourne.
“The new home market in Melbourne has been exceptionally strong over a number of years and we are now seeing a very modest slowdown in activity,” the principal economist said.
“While market conditions are slowing in Melbourne, building activity will continue to be solid given the very large volume of work still in the pipeline.
“The impact of the tighter constraints on finance will ease over the year.”
The HIA is expecting detached house starts to rise slightly in 2018 following the 2.8 per cent decline that occurred in 2017.
“Beyond that temporary lift, we expect the downturn in detached house building to properly take root in 2019 — and house sales appear to be providing a very early indication of this occurring,” Mr Reardon concluded.
During May 2018, new house sales declined in all five markets covered by the HIA New Home Sales Report. The largest reduction in house sales occurred in New South Wales (-6.8 per cent) followed by Queensland (-5.0 per cent), Victoria (-4.6 per cent), Western Australia (-2.4 per cent) and South Australia (-0.2 of a percentage point).
[Related: Rate hike would be a ‘major policy mistake’]
