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New home sales slumped in November, as rising rates continued to squeeze mortgage holders’ pockets and put a strain on building activity.
Data from the Housing Industry Association (HIA) showed new home sales fell by 23.4 per cent over the three months to November.
The figures represent a deeper decline compared to the 15.7 per cent drop in new home sales activity recorded during the October quarter and are 29.1 per cent lower compared to the same period last year.
The HIA New Home Sales report, a monthly survey of the largest volume home builders in the five largest states, showed that new home sales fell sharply in almost all regions in November.
Compared to the same quarter in 2021, new home sales in NSW were down by 51.5 per cent, down by 38.3 per cent in Queensland, down by 30.9 per cent in Western Australia, and down by 19.1 per cent in Victoria.
The only region to buck the trend was South Australia, posting a 28.1 per cent increase compared to the same period last year.
HIA economist Tom Devitt said that the new home sales are showing the “early effects” of the Reserve Bank of Australia’s (RBA) rate rise cycle.
Since May, the central bank has been battling to rein in an inflation rate running hot at levels not seen since 1990.
From a record low of 0.10 per cent at the start of its rapid rate rise cycle, the country’s official cash rate currently stands at 3.1 per cent.
“The RBA delivered its eighth consecutive cash rate hike in December, for a total increase of 3 per cent since May. In terms of steepness, 2022 now officially overtakes the 1994 hiking cycle when the cash rate was lifted by a total of 2.75 per cent.
“This produced the weakest three months of sales since the first national lockdown froze new home sales in early 2020,” Mr Devitt stated.
He said that while new home sales rose 1.2 per cent on a monthly basis, the figures followed a “very weak” October performance.
Mr Devitt surmised that the latest data was clear indication that the “RBA has brought the housing boom to an end”.
“When this hiking cycle began, there was a significant pipeline of home building work under construction, and many more projects yet to even begin construction. This has created a significant lag in the RBA’s impact on employment across the economy,” the economist explained.
Due to these lags, Mr Devitt expects that the effect of the latest hike in December will not be fully reflected in building activity until late-2023.
He also warned further hikes in 2023 would cause a deeper and more prolonged trough in home building activity.
“The RBA will not restore the economy to stable growth by putting the housing industry through boom-and-bust cycles,” concluded Mr Devitt.
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