New home sales in Australia fell to a 15 year low in August and more interest rate cuts are needed to boost the residential property sector it is claimed.
The latest figures show that sales of new properties fell 5.3% in August. Detached new home sales were the weakest, falling 5.8% and multi units fell by 2.5%, according to the latest homes sales report from the Housing Industry Association, the voice of Australia’s residential building industry.
In August 2012 the number of seasonally adjusted new detached house sales fell by 7% in New South Wales, by 8.6% in Victoria, by 2.9% in Queensland, by 2.6% in South Australia, and by 9.4% in Western Australia.
‘New home sales for August are the latest in a string of soft new housing updates for this financial year, and that follows a very weak year for new home building in 2011,’ said HIA chief economist Harley Dale.
‘Indeed, following two consecutive years of decline in new housing starts over 2010/11 and 2011/12, and leading indicators pointing to weakness extending into 2012/13, policy settings in August 2012 were clearly inappropriate. A fresh round of interest rate cuts will help rebalance this situation, although financial institutions obviously need to play their role in cementing this outcome,’ he explained.
But he added that rate cuts won’t single handedly generate the new home building recovery Australia requires.
‘Governments have an important role to play in driving reform measures to lower the excessive tax base faced by the sector. In 2012 that reform process remains too slow and in some quarters is virtually non-existent,’ he said.
Dale also pointed out that the August building approvals figures don’t provide any insight on when a sustainable recovery in Australia’s new home building sector will emerge.
Although there was a headline rise in seasonally adjusted building approvals for the month of August 2012 of 6.4% levels are still historically low. Approvals for the dominant detached house fell by 1.7% and are down by 4.5% from August 2011. Approvals for other dwellings are down 28.4% on a year ago.
‘This profile for building approvals highlights the long road ahead to achieve a robust and sustainable new housing recovery. The remaining four months of updates for building approvals for 2012 will be crucial, because right now there is no compelling evidence pointing to us being on the cusp of a new housing recovery,’ said Dale.
‘Without evidence emerging soon of a sustainable recovery in leading indicators such as building approvals the prospect of a third consecutive yearly decline in dwelling commencements, from a starting point of recessionary levels, will come into play,’ he added.
The HIA believes that new housing is close to being the most heavily taxed sector of the Australian economy.
‘Sadly, with one or two conspicuous exceptions, new housing remains a sleepy hollow when it comes to government policy reform,’ said Dale.