Higher interest rates, credit conditions and higher costs have left Australia’s housing market with grim results. There is compelling evidence to suggest that 2011 will be even weaker than 2010. Read more about this in the full article by PropertyWire.
Sales of new properties in Australia were almost static in February and may suggest a weak year to come for the country’s residential real estate market, a new report claims.
The latest Housing Industry Association-JELD-WEN New Home Sales Report shows the number of new homes sold increased 0.6% in February, following a 2.5% gain in January. The survey also found sales of homes in multi dwelling developments were down 7.6%, while detached house sales rose 1.5%.
HIA chief economist Harley Dale said the positive January figures had failed to extend to February, although detached house sales in Victoria went up by almost 3%.
‘At the very time when new home conditions need to be continually improving we are faced with compelling evidence of a considerably weaker 2011 compared to last year,’ Dale said.
‘The fate of residential building in 2011 has been all but sealed by higher interest rates, continuing tight credit conditions, and a complete lack of progress on policy reform to reduce excessive new housing costs,’ he explained.
Housing starts are forecast to fall by 15% to a level of 143,430 in 2011, wiping out a majority of the short-lived, stimulus driven gains of last year.
‘Housing starts have only increased in two of the last ten years. This fact delivers a very poor scorecard on new home and rental market affordability which especially hurts aspiring first home buyers and lower income households,’ added Dale.
Recent extreme weather events could have affected sales, he explained, adding that new home sales are running at volumes considerably below those experienced during the stimulus driven boom of 2009 and early 2010.
Compared to a year earlier, total sales over the three months to the end of February 2011 were down 10%. Both local government building approvals and new housing loan approvals are also trending down once more.
HIA said the three month profile for sales volumes remained positive, with detached houses up 3.7%, while unit sales were down 1.4%. ‘However, the increase for detached houses is exaggerated by a weak starting point in August last year, and sales in February this year are only back to the levels of mid 2010,’ the index points out.
The survey also found detached new house sales increased 0.9% in New South Wales and 2.9% in Victoria. Sales fell 13.3% in Queensland, with the natural disasters in the state having a significant negative impact, HIA said. Sales were also down 4.3% in South Australia and 2.2% in Western Australia.
With the cash rate expected to rise in the coming period, Dale said the onus was on the state and federal governments to reinvigorate the policy reform process to reduce the excessive costs of new housing.
‘The housing supply crisis is upon us now and without proper leadership from the Federal Government it is only going to escalate,’ he added.
HIA is calling for the introduction of stimulus measures to boost new housing and the appointment of a minister whose sole responsibility will be remedying Australia’s housing shortage crisis and ensuring there is an adequate supply of new housing in the years to come.
Dale said that no new taxes, including a carbon tax, should be imposed on the industry and it will only add to the cost of new housing and there needs to be concrete action to reform the supply side of Australia’s housing market, including assisting states to remove stamp duties on new homes and removing planning and development bottlenecks.
This article is republished with permission from PropertyWire.