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New home sales may have peaked after 12 months of strong growth, but were offset by a decline in May.
The Housing Industry Association has reported that new home sales recorded a monthly fall of 4.3 per cent in May – despite enjoying an annual rise of 21 per cent.
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Chief economist Harley Dale said the market was still in a healthy state given that May was the first time sales had gone backwards in five months.
“Further upward momentum may be a challenge and it is a distinct possibility that new home sales have peaked for the cycle,” he said.
“The volume of new home sales nevertheless remains consistent with further growth in detached house building and the continuation of historically elevated levels of multi-unit construction in 2014/2015.”
Mr Dale said detached house construction has the potential to grow faster in 2014/2015 than in 2013/2014, but land supply constraints were becoming clear, especially in Sydney and Perth.
“Inadequate land supply is one prominent example of supply-side constraints preventing new home construction reaching its full potential, highlighting the need for a focus on housing policy reform,” he said.
[Related: Fewer migrants could mean less housing]
