NEW HOME SALES REMAIN AT ROCK BOTTOM

Sales of new homes appear to be stabilising at very low levels

Sales of new homes in April 2023 increased by 6.8 per cent compared to the previous month. This sees sales for the three months to April stable compared to the previous three months (down 0.4 per cent) and down by 42.8 per cent compared to the same time the previous year.

This does suggest that sales may have levelled out and reached a floor. The RBA’s rate increases last year and this year will continue to hold down new sales and cause further cancellations as finance becomes unobtainable for an increasing number of buyers.

The cancellation rate remains elevated in the three months to April. These cancellations are occurring typically because the client is no longer able to gain access to finance given the higher cash rate and extraordinary macro-prudential restrictions.

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High levels of cancellations continue to indicate the financial strain the RBA’s relentless monetary tightening is placing on households.

The low volume of sales, combined with elevated cancelations, is eroding the pipeline of work rapidly and will see the volume of homes commencing construction continue to slow through 2023 and into 2024.

On a state-by-state basis, monthly sales rose in NSW and South Australia, with an increase of 19.9 per cent and 17.1 per cent respectively on March figures. Given the historically low volume of sales, some monthly volatility should be expected.

There are also encouraging signs that Western Australia is again set to buck national trends with sales in the three months to April higher than the previous three months to be 37.1 per cent higher than at the same time the previous year. Of note, sales in Western Australia in the three months to April 2023 were 40.3 per cent higher than at the same time in 2019.

This is largely a reflection of the depth of the home building trough in Western Australia prior to the pandemic and also indicates that home building in Western Australia will not return to the ‘bust’ conditions of 2019 given ongoing economic improvements.

In the three months to April compared to the previous three months, all other states (except WA) recorded a further decline in sales

 New home sales across Australia rose by 6.8 per cent in April 2023 compared to the previous month

 New Home sales for the three months to April remain stable compared to the previous three months to be 42.8 per cent below the same time the previous year.

 With sales relatively stable, albeit at extraordinarily low levels for 6 months, it does appear that the market has reached rock bottom

 This month's sample captures 22 per cent of Australia's new detached home building sector.