New home sales in Australia posted a fourth consecutive gain in April 2014, providing an important positive signal for broader economic activity, according to the Housing Industry Association.
Private sector new home sales saw a monthly gain of 2.9% and an increase of 6% over the three months to April this year. Multi-unit sales increased by 9.3% while detached house sales were up 1.8%, the sixth consecutive increase for this sector.
‘The recovery in new home building is a key plank in Australia’s economic growth. Momentum in new home building activity will carry over into the June quarter, while the trajectory evident in coming months for leading indicators such as new home sales and building approvals will provide crucial insight to the growth prospects for the broader economy in 2014/2015,’ said Harley Dale, HIA chief economist.
‘A healthy April for new home sales provides a promising start to the June 2014 quarter. It is not just the magnitude of a new home building recovery that is important, but also the breath and duration of that recovery. Market forces are to date largely overcoming the excessive tax and regulatory environment in which the sector operates, while the structural shortage of skilled labour has yet to fully rear its head in the cycle,’ he explained.
‘To unleash the productivity dividend the new home building sector can provide the Australian economy in addition to the positive impetus already in play, policy makers across all levels of government need to address these structural impediments,’ he added.
The data shows that overall seasonally adjusted detached house sales increased by 6.4% in Western Australia, by 5.2% in New South Wales and by 0.5% in Victoria. Detached house sales fell by 2.1% in Queensland and by 6% in South Australia.
The HIA is forecasting that new home building will increase by 7.1% in 2014, its second highest level on record. This follows growth of 10.9% recorded in 2013. But commencements are forecast to decline in 2015 and 2016.
Renovation activity is forecast to recover from a 10 year low. ‘After dropping to decade lows in 2013 there is huge upside potential for renovations activity. Two consecutive quarters of growth through to March 2014 provides confidence for our forecast of 1% growth in the total value of renovations investment in 2013/2014,’ said Dale.
Momentum in renovations activity is forecast to build in coming years with growth of 1.2%, 2.3% and 2.5% over the three years to 2016/2017. This would see investment exceed $30 billion for the first time since 2011/2012.