The most recent downturn in Australia’s housing market has been precipitated by tightening credit conditions, with the latest new home sales numbers revealing the fifth consecutive monthly decline.
New house sales continued to slide in May, with New South Wales experiencing the largest monthly reduction, Housing Industry Association figures show.
Last month’s decline has continued the downward trend in new house sales in the first half of 2018.
“New house sales declined by 4.4 per cent in May and are now 12.8 per cent lower than the most recent cyclical high that occurred in December last year,” HIA principal economist Tim Reardon said.
The HIA New Home Sales report revealed that the reduction in May was synchronised across all states surveyed, with sales declining in Melbourne for the first time in this cycle.
“The new home market in Melbourne has been exceptionally strong over a number of years and we are now seeing a very modest slow-down in activity.
“While market conditions are slowing in Melbourne, building activity will continue to be solid given the very large volume of work still in the pipeline.”
In May, new house sales in New South Wales fell by 6.8 per cent, 4.6 per cent in Victoria, 5.0 per cent in Queensland, 0.2 per cent in South Australia and 2.4 per cent in Western Australia.
“Access to finance has become the barrier to ongoing growth in home sales,” Reardon said.
“The availability of credit has tightened over the past 12 months with banks responding to the decline in house prices and the Banking Royal Commission by limiting lending to new home buyers.”
In some positive news, the HIA said that the impact of tighter constraints will ease over the year.
The report said that detached house starts are forecast to rise slightly this year following the 2.8 per cent decline in 2017.
“Beyond that temporary lift, we expect the downturn in detached house building to properly take root in 2019 – and house sales appear to be providing a very early indication of this occurring,” Reardon said.