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Despite an increase in new home sales in April, which hints at new property turnover rates having already leveled out and reached a floor, elevated cancellation rates continue to be a cause for concern for the industry.
Housing Industry Association’s (HIA) latest report covering the five biggest states showed a 6.8 per cent increase in new home sales over the month.
Over the latest three-month period, sales of new homes across the country declined except in Western Australia, where the turnover rate of new homes rose by 37.1 per cent during the quarter.
Generally, the latest figures see sales for the three months to April stable compared to the previous three months, with HIA chief economist Tim Reardon noting that “this suggests that sales may have levelled out and reached a floor, barely more than half their levels from a year earlier.”
“With sales relatively stable, albeit at extraordinarily low levels for six months, it does appear that the market has reached rock bottom,” he added.
The expert highlighted Western Australia bucking the long-term trend of declining new home sales, as the state saw a 40.3 per cent increase in new home turnover rates compared to the same period in 2019.
“This is an encouraging sign that this market may defy the best efforts of the RBA,” he added.
In a further show of strength, Western Australia was also the only state to record a year-on-year increase in new home sales, with figures up 9.8 per cent annually.
Over the last 12-month period, sales were down, particularly in NSW, which posted a 70.5 per cent decline. Queensland, Victoria, and South Australia also recorded declines.
However, the expert highlighted that the cancellation rate remains a concern, with more than one new home project getting cancelled for every four new homes sold per month.
“This is its highest level since the start of the pandemic and is resulting in an accelerated decline in the pool of work sold but not commenced,” Mr Reardon said.
Australia is in the grips of a construction industry crisis, which reportedly started at the tail end of 2021, when major Queensland construction firms Privium and BA both went into liquidation during December.
The sector’s woes continued in 2022, as the start of the year saw Victorian firm Hotondo Homes Horsham collapse with liabilities of over $1 million.
A month later, building giant Probuild was placed into voluntary administration, leaving $250 million in outstanding debts in the wake of its fall.
The grim list continued to grow as the year progressed, as a number of other high-profile companies also collapsed, including Inside Out Construction, Dyldam Developments, Home Innovation Builders, ABG Group, New Sensation Homes, Next, Pivotal Homes, Pindan, ABD Group, Waterford Homes and Solido Builders — with at least 20 construction companies in the country reportedly going bust in 2022.
In 2023, Porter Davis Homes Group (PDH Group) was the latest firm to join the ranks after going into liquidation at the end of March and leaving more than 2,500 house contracts across Victoria in the lurch.
Looking forward, the economist expects the rate increases to continue to affect new home sales rates across the country.
“The RBA’s rate increases last year and this year will continue to hold down new home sales and cause further cancellations as finance becomes unobtainable for an increasing number of buyers,” he concluded.
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