New home sales rise 1.1% but housing industry still concerned

New home sales have concluded a dramatic bout of declines by rising 1.1% in August, according to latest figures from the Housing Industry Association, although improvements have been confined to a few states.

The figures show sales rose by 1.1% after plummeting 8% in July and 8.7% in June, strengthening the group’s push for industry assistance at next week’s Tax Forum.

HIA chief economist Harley Dale says although the result appears positive “there is a little bit of devil in the detail”.

 “If you look at the results in Queensland, during the month of August this was actually the first month that the state government building boost came in,” he says.

“That has given the industry a small lift off a very low base.

“You’ve got a modestly better month in Victoria within an overall downward trend and that has been the healthiest markets.

“There are specific results that have led to the boost in the headline rate.”

The results show that detached home sales rose by 1.5% but overall are down by 15% over the August quarter.

Sales of multi-units fell by 2.2%. In Queensland sales of detached homes rose by a massive 9.8% while Victorian sales rose by 3%.

But Dale points out that New South Wales sales fell by 5.8% – the fourth straight decline – while sales fell by 4.7% in South Australia and by 0.7% in Western Australia.

Dale warns that while the results may show an improvement for this month overall they show a severe downward trend.

“Sales are still down by about 15% and we continue to get signs that new home building conditions are deteriorating, and those are deteriorating amid concerns about the global economy,” he says.

Lower consumer confidence has restricted sales and small businesses are collapsing as a result.

During the past six months various building and construction firms have been placed into receivership or administration due to lower demand for construction.

CommSec economist Craig James commented on the result by comparing them to a “dead-cat bounce”.

“Aussie consumers and home-buyers remain super cautious and that mood is continuing to constrain activity for retailers and housing dependent businesses,” he says.

“Anecdotally the recent drop in fixed term interest rates is boosting enquiry levels in the housing market but it is yet to show up in the data.”

Dale says the results in Queensland bolster the call for national stimulus.

“The case for stimulus is strengthening as the industry weakens,” he says.