Confidence, New Home Sales Plummet

Lockdowns, low-confidence and a lack of incentives are weighing down new home sales, which dropped 20.5 per cent in July.

Despite the huge drop, the number of sales was still 4.3 per cent higher than at the same time in 2018, which was a relatively solid year for home building, according to the Housing Industry Association.

Consumer sentiment also fell to its lowest point this year in the Westpac-Melbourne Institute index, which showed para-professionals and tradies were most impacted by the lockdowns.

The survey also showed the “time to buy a dwelling” had slumped to its second lowest point since 2010, indicating future sales could continue to fall.

However, Australian Bureau of Statistics finance and approvals data indicated there was a record number of homes under construction across the country.

Western Australia was the only state with an increase in new home sales for July, up 8.5 per cent.

This was in contrast to declines in New South Wales, -14.8 per cent; Queensland, -25.4 per cent; South Australia, -29.4 per cent; and Victoria, -32.2 per cent.

Private new house sales Australia

_{^{^Source: HIA}}

HIA economist Tom Devitt said sales data over coming months would indicate if recent lockdowns had impaired consumer confidence or if this July result was an anomaly.

“With lockdowns in multiple states restricting trade and eroding confidence, it is not surprising that fewer people were able to visit display homes,” Devitt said.

“Despite this poor result in July, sales for the three months to the end of July are only marginally lower than at the same time in 2020 when the first positive impacts of HomeBuilder were emerging.”

Westpac senior economist Matthew Hassan said sentiment was still above 2020 levels but the lockdowns were taking a toll on family finances and people were less confident about buying homes and the year ahead.

“Consumer sentiment around housing continues to be shaped more by the broad-based boom in prices than Covid developments,” Hassan said.

“The latest month again shows a clear shift in the market that is likely to see owner occupier activity slow sharply as investor activity strengthens.

“The ‘time to buy a dwelling’ index posted another sharp decline, down 8.3 per cent to 88.9.

“The index has now slumped by nearly a third from its November high of 132, August marking the second lowest read since 2010, the lowest being during last year’s national lock-down.

“The steep fall is a clear warning that the rapid rise in dwelling prices, and associated deterioration in housing affordability, is starting to weigh heavily on buyer sentiment amongst owner occupiers.”