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While the Reserve Bank hit the pause button on rate hikes in July, a new report reveals that the impact of the last 12 rate rises is yet to fully run its course on home sales.
The Housing Industry Association (HIA) New Home Sales Report has revealed that new home sales fell 4.8 per cent nationally in June.
Tim Reardon, HIA chief economist, said property transactions remain at “rock bottom levels”, highlighting the poor result in June leaves sales in the 2022–23 financial year down by 33.2 per cent compared to the previous year.
Over the last financial year, sales declined across all large states, with NSW leading the downfall with a staggering decline of 56.1 per cent, followed by Queensland (down 38.5 per cent) and Victoria (down 31.2 per cent).
Smaller states were not spared from the downturn, with Western Australia and South Australia recording home sale declines of 12.1 per cent and 2.8 per cent, respectively.
Mr Reardon stated the Reserve Bank of Australia (RBA) raising the cash rate over the past year has resulted in a “significant decline in the volume of new home sales”.
“This will result in the least number of new homes commencing construction for more than a decade in 2024,” the economist added.
He said the last year has seen the impact of a 4 per cent increase in the RBA’s cash rate filter through to the new home market, compounding the impact of soaring construction costs across the industry.
In addition, Mr Reardon highlighted a large number of existing projects are being cancelled, while buyers are unable to gain finance as interest rates and construction costs rise when contracts have been signed.
The lack of new work entering the pipeline will mean fewer projects being started, Mr Reardon added, while the volume of dwellings under construction has shrunk rapidly from late 2022.
“This will occur at the same time that Australia has a pre-existing shortage of housing, and overseas workers and students return to Australia in record numbers,” Mr Reardon warned.
To address the shortage of housing across the country, Mr Reardon called on policymakers to stop increasing the cost of new homes through taxes and regulatory imposts.
“The more homes are taxed, directly or indirectly, the fewer homes will be built,” Mr Reardon concluded.
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