New home sales rose strongly in October

“Sales of new homes continued to rise in October, continuing a trend that is increasingly evident in most markets across Australia,” stated HIA Economist, Maurice Tapang.

The HIA New Home Sales report is a monthly survey of the largest volume home builders in the five largest states and is a leading indicator of future detached home construction.

“New home sales in the month of October rose by 8.8 per cent compared to September. This monthly rise was driven by an increase in sales in New South Wales, Victoria and Queensland,” added Mr Tapang.

“This month’s strong increase in sales comes as unemployment remained at exceptionally low levels, interest rates remained unchanged for over a year and prices of home building materials stabilised.

“Other indicators of future home building activity show a consistent story, suggesting that the new home market nationally has already reached the trough in this cycle sometime in mid-2024.

“Housing finance data shows the number of loans issued for new home purchase and construction in the September quarter 2024 increased by 14.3 per cent compared to the previous year and approvals data shows the number of detached homes approved in the September quarter 2024 rose by 13.1 per cent compared to the previous year.

“As anticipated however, the synchronisation of building cycles across all states and territories that was evident through the pandemic is no longer evident, with state government policies increasingly determining the length and depth of market downturns.

“The depth of the trough in and subsequent rise in new home sales varies across the different states, affected by factors including the cost of residential land.

“Western Australia was the first market to see an increase in sales in 2023, which has continued to flow through to new housing approvals and commencements.

“Queensland and South Australia have started to see an increase in sales this year, which is flowing through to approvals data.

“Sales in Victoria appear to be slowly increasing, albeit off a very low base. This month, Victoria saw the strongest monthly rise in new home sales, up by 26.5 per cent compared to the previous month.

“If this trend continues, New South Wales will be the only laggard market for home building activity. This is driven by the high cost of residential land, particularly in Greater Sydney.

“South Australia implemented changes to liveable housing and energy efficiency provisions in September, which led to a pull-forward in sales as households sought to avoid the additional cost. In the month of October, sales in South Australia fell by 18.0 per cent as a result.

“New home sales nationally are showing an upward trend, with sales in the last twelve months 8.0 per cent higher compared to the previous year.

“The rise in new home sales will see an increase in house commencements from early 2025,” concluded Mr Tapang.

Sales in Queensland in the three months to October 2024 rose by 33.4 per cent compared to the same time in the previous year. This was followed by South Australia (+20.4 per cent). The other states recorded declines in sales over the same period, led by Western Australia (-27.8 per cent), followed by New South Wales (-19.7 per cent) and Victoria (-6.0 per cent).