by Alan Thornhill
New home sales hit a cyclical peak in February, according to a new survey.
The survey, published by the Housing Industry Association, was conducted among Australia’s high volume builders.
It showed that, on seasonally adjusted figures, new home sales rose by 1.1 per cent in February following a gain of 1.8 per cent in January.
The volume of sales is now just above the previous peak of April 2014.
““The headlines for the national new housing sector continue to dazzle in early 2015,” HIA Chief Economist, Dr Harley Dale said.
The action now is in the multi-unit sector.
“The February new home sales result reflected a jump of 11.1 per cent in ‘multi-unit’ sales, while detached house sales fell by 1.3 per cent,” Mr Dale said.
This is likely to continue.
“The signal from both HIA new home sales and ABS building approvals is for further upward momentum to multi-unit dwelling construction in 2015,” Mr Dale said.
But he also predicted “a consolidation in detached home building at volumes above the long term average.”
“New home building conditions vary greatly around the country…” he added.
“Detached house sales are easing in New South Wales and Western Australia, previously key drivers of growth, and have fallen significantly in South Australia.
“The modest growth in new house sales in Queensland and Victoria is not enough to offset these declines.”
In February detached house sales increased by 1.5 per cent in Victoria and by 0.2 per cent in Queensland.
But detached house sales fell by 4.8 per cent in New South Wales, 2.0 per cent in South Australia and 2.9 per cent in Western Australia.
The total level of sales in the three months to February 2015 compared with the previous three months was lower in NSW (-6.9 per cent), SA (-2.8 per cent) and WA (-1.3 per cent).
Elsewhere sales increased; by 3.8 per cent in Victoria and by 9.0 per cent in Queensland.
by Alan Thornhill
The Australian economy could be damaged by sharp falls in property prices, if low interest rates fuel fresh speculation, the Reserve Bank says.
Its warning is contained in the Financial Stability Review the bank published today.
The bank noted that new mortgage finance “remains skewed to investors,” particularly in Australia’s largest cities.
And this was not without risk.
“Ongoing strong speculative demand would tend to amplify the run-up in housing prices and increase the risk that prices in at least some regions might fall significantly later on,” it said.
“In the first instance, the consequences of such a downturn in prices are more likely to be macroeconomic in nature because the effects on household wealth and spending would be spread more broadly than just on the recent property purchasers,” the bank warned.
But it added: “…the further housing prices fall in that scenario, the greater the chance that lenders would incur losses on their housing loans.
“At the margin, the recent decline in mortgage interest rates can be expected to boost demand for housing further, though it will also make it easier for existing borrowers to service their debts.
“Indicators of household stress are currently at low levels, but could start to increase if labour market conditions weaken further than currently envisaged.
“In this environment of low interest rates and strong demand, it is important that lending standards do not decline.”
The bank said measures announced by the Australian Prudential Regulation Authority and the Australian Securities and Investments Commission in December were meant to ensure that this did not happen.
But the situation is being watched closely.
“While it is too early to see the effects of these measures in overall housing lending activity, the authorities will be monitoring an array of information in the period ahead to help ensure that the current risk profile in the mortgage market does not deteriorate,” the bank said.
But it added: “Outside of the property markets, risks in the non-financial business sector appear relatively low.”
Weathercoast by Alan Thornhill
A novel on the murder of seven young Anglican Christian Brothers in the Solomon Islands.
Available now on the iTunes store.
Alan Thornhill is a parliamentary press gallery journalist.
Private Briefing is updated daily with Australian personal finance news, analysis, and commentary.
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