New home sales keep rising as building approvals ease

New home sales keep rising as building approvals ease

Australian residential construction activity maintained momentum in the March quarter, edging slightly higher than the previous three months, although there are tentative signs that activity may be reaching its peak despite an ongoing increase in sales.

According to the latest figures from the Australian Bureau of Statistics (ABS), strength in the new homes market continued to support the building industry during the first quarter of this calendar year with the number of private-sector homes under construction rising 5.9 per cent to 35,869.

While building starts for other dwellings such as apartments and townhouses were down 11.3 per cent, the March quarter saw the number of total dwellings commencements rise 0.2 per cent from the previous quarter. That has kept building starts 13.1 per cent higher than the same time last year.

The rise in building commencements compares with recent data from the ABS released last week showing a month-on-month weakening of dwelling approvals. This is despite evidence from the Housing Industry Association (HIA) that demand for homes has not abated, as shown by its monthly New Home Sales report indicating a significant jump in new home sales in June.

In a preview of what may lay ahead for the industry, the ABS last week revealed total dwelling approvals fell by 7.1 per cent in May, although they are still 52.7 per cent higher than a year earlier. This was the second consecutive month of falls after total dwelling approvals hit a three-year high in March, reflecting the end of the HomeBuilder grant stimulus.

Approvals for private-sector houses fell across all mainland states with Western Australia down 18 per cent, followed by South Australia (16.9 per cent), Queensland (13.8 per cent), Victoria (5.8 per cent) and NSW (4.6 per cent).

The ABS statistics come on the heels of data from the HIA which showed new home sales surged 15.3 per cent in June, taking sales over the quarter 11.2 per cent higher than the same time last year.

"The strength of new home sales nationally suggests that there will be a significant number of new homes entering the pipeline post-HomeBuilder which will ensure activity remains elevated into 2022," says HIA economist Angela Lillicrap.

"Sales in the June 2021 quarter are below the levels experienced during the nine months of the HomeBuilder program but are stronger than the same quarter in 2019.

"Sales are also on par with the June 2018 quarter, which was a strong year for detached home building."

Lillicrap says not all markets are equal in the current environment driven by elevated levels of interstate and intrastate migration.

"New home sales in NSW and Western Australia were over a third higher in the June 2021 quarter compared to the same time in 2019.

"Sales in Queensland were 4.4 per cent higher compared to the June 2019 quarter, while Victoria is flat (down by 0.1 per cent).

"South Australia had the strongest response to HomeBuilder, but sales since the end of the program remain lower by 14.4 per cent compared to the June 2019 quarter."

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