• Australian new home sales have stablised after slumping over 8% last year.
• Other housing market indicators have stabilised recently, hinting that conditions may be slowly staring to turn.
• Australian building approvals data for March will be released on May 3. Australia’s Performance of Construction Index for April will also arrive on May 7.

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Australian new home sales stablised in the first quarter of the year, a welcome development after a fairly rocky period in 2018.

According to Australia’s Housing Industry Association (HIA), sales of detached homes fell by 0.1 in March after seasonal adjustments, holding near the lowest level in well over five years.

However, the pronounced slowdown last year — which saw total sales slump 8.5% — isn’t getting any worse at this point.

The stabilisation in sales fits with a number of other housing market indicators that have shown tentative signs of improvement in recent months, albeit from weak levels.

Across the mainland states, sales rose by 8.6% in South Australia, outpacing increases of 4.8% and 2.3% respectively in New South Wales and Western Australia. Despite those gains, sales fell by 4.7% and 2.3% respectively in Queensland and Victoria, resulting in the modest decline nationally.

The data reflects sales of detached homes, rather than for units, based on responses received from Australia’s largest home builders by volume.

The HIA says the report provides an early indication of trends in the residential building industry, specifically the likely trends in housing construction.

With a number of housing market indicators starting to improve slightly, the latest information comes as welcome news for Australia’s residential construction sector.

Geordan Murray, Senior Economist at the HIA, said the latest news hints at the impact of tighter lending standards, something that has not only impacted prices for established homes but also the ability to finance new home purchases, may be starting to ease.

“The credit squeeze impacted the market at a time when the natural housing cycle was already beginning to cool. Banks reduced the amount of money they were willing to lend and the time it took to get a loan approved blew out,” he said.

“The market is now showing signs of adjusting to the new levels of lending.”

Along with the credit squeeze, Murray said the low level of sales to start the year may also reflect the uncertainty ahead of the federal election.

“There is uncertainty surrounding the federal election, which typically subdues new home sales and approvals as investors and owner occupiers put decisions on hold until after the election,” he sad.

“The election result will rectify this uncertainty but the potential for higher taxes on housing means a post-election rebound in sales may not eventuate.”

While the answer to whether the election will lead to an improvement in sales won’t be known for a few months, a pickup in new work would be welcomed by home builders.

According to data released by the ABS, private sector approvals to build detached homes fell by 13.8% in the year to February this year.

Fitting with the decline in newly approved dwellings, activity levels at housing construction firms continued to deteriorate in March, according to the Ai Group’s Performance of Construction Index (PCI), remaining near the lowest level since mid-2013.

We’ll receive updated building approvals figures on Friday, May 3. The PCI for April will also be released on May 7.

Any signs of an improvement in these indicators will help to improve confidence that housing market conditions may be slowly starting to turn.

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