Weak New Home Sales Signal Need for Steady Interest Rates

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                                                                                                                                                                                                            29 September 2010


         Weak New Home Sales Signal Need for
                Steady Interest Rates
New Home Sales fell for a fourth consecutive month in August, clearly signalling the
appropriateness of keeping interest rates on hold.

The latest HIA - Jeld-Wen New Home Sales Report, a survey of Australia’s major residential
builders, showed that the number of new homes sold fell by 2.6 per cent in August 2010. Sales
were down by 13 per cent over the three months to August to be 11 per cent lower when compared
to the same period in 2009. Building approvals were down by over 6 per cent for the three month
period to July 2010, with further weakness to come.

HIA Chief Economist, Dr Harley Dale, said that the new home market was entering a period of
softer demand.

“Previous interest rate hikes and the withdrawal of fiscal stimulus have dampened new housing
demand, while there has been insufficient progress made in reducing the supply side barriers that
raise the cost of new housing,” Harley Dale said.

“An array of leading housing indicators, including new home sales, is signalling a fall in housing
starts in 2011, even if interest rates remain steady. That outcome will mean there has only been
two years in the last ten, 2002 and 2010, when new home starts have grown,” Harley Dale said.

“A premature hiking of interest rates would exacerbate the impending decline in new home
building,” Harley Dale said.

“At the same time, renewed weakness in new housing highlights the opportunity to act, rather than
an excuse to sit back, when it comes to creating a more flexible and less costly regulatory
environment than the one which is currently pushing people away from new housing towards
existing property,” Harley Dale added.

Detached house sales fell by 3.4 per cent in August 2010, while sales in the multi-unit sector
increased by 4.3 per cent.

In the month of August 2010 detached new house sales fell by 20.3 per cent in New South Wales.
Sales also fell in Queensland, down by 2.8 per cent, and in South Australia, down by 5.6 per cent.
Sales increased by 2.6 per cent in Victoria and by 2.7 per cent in Western Australia.

                                                                 New Private Dwelling Sales - Australia
                                                                                              Seasonally Adjusted
                     9,500                                                                                                                                                                                  16,000

                     9,000                                                                                                                                                                                  14,000
                                                                                                                                                                                                            12,000
                     8,500
                                                                                                                                                                                                            10,000
                     8,000
                                                                                                                                                                                                            8,000
                     7,500
                                                                                                                                                                                                            6,000
                                                                                                                                                                                               -2.6%
                     7,000
                                                                                                                                                                                                            4,000
                     6,500                                                                                                                                                                                  2,000
                     6,000                                                                                                                                                                                  0
                                                        Feb-08




                                                                                                                  Feb-09




                                                                                                                                                                        Feb-10
                                      Oct-07




                                                                  Apr-08




                                                                                                Oct-08




                                                                                                                           Apr-09




                                                                                                                                                      Oct-09




                                                                                                                                                                                 Apr-10
                             Aug-07




                                                                                                                                             Aug-09




                                                                                                                                                                                                   Aug-10
                                               Dec-07




                                                                                     Aug-08



                                                                                                         Dec-08




                                                                                                                                                               Dec-09
                                                                            Jun-08




                                                                                                                                    Jun-09




                                                                                                                                                                                          Jun-10




                    Source: ABS 8731.0 and HIA                             HIA New Home Sales                                   ABS Seasonally Adju sted Approvals - Private Sector




For further information please contact:
Harley Dale, Chief Economist on 0414 994 186
Website: http://economics.hia.com.au
***For a full copy of the New Home Sales Report (media only) or for an annual subscription, please contact Kirsten Lewis on
(02) 6245 1393 or k.lewis@hia.com.au

				
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