Housing market can look forward to an "optimistic" year ahead after the new home construction industry has experienced growth in sales, according to the latest Market Report from the Housing Industry Association (HIA) ).
In the past three months, until November 2019, sales of private single-family homes increased 2.8% from the previous quarter. This came after nearly two years of declining home sales, when the market had broken a record.
Western Australia recorded the strongest growth in new home sales with 14.4%, followed by Queensland at 2% and Victoria at 1.6%. In contrast, sales of single-family homes in New South Wales and South Australia declined over the period by 0.5% and 2.5% respectively.
"The residential construction industry may be optimistic that activity will stabilize in 2020 after suffering two years of fairly sharp decline," said Diwa Hopkins, economist at HIA.
Despite the increase registered, however, the last three-month sales in November remained 5.7% lower than those of the previous year.
However, the resumption of new home sales has been accompanied by an increase in loans and a return to growth in house prices, particularly in the crucial markets of Sydney and Melbourne.
Hopkins said the Australian Prudential Regulation Authority (APRA) had removed the 10% cap on growth in investor loans and removed the limits on interest only loans, coupled with a series of rate cuts by the Reserve Bank of Australia (RBA), helped mitigate the deteriorating housing market conditions.
In addition, income tax cuts and the issuance of the first tranche of the government's first deposit guarantees on home loans are boosting the outlook for the housing market, an increasing number of households realizing that they can now act.
"This resumption of general housing market conditions is expected to support demand for new homes, with construction activity expected to stabilize in 2020 before resuming growth later," Hopkins said.
And it seems that this hope for recovery is really necessary – a separate analysis by HIA showed that loans to households for construction and the purchase of new housing remained low. In fact, construction loans fell 8.4% to their lowest level since 2012.
This happened despite the 1.6% growth in homeowner loan commitments overall and the 2.2% gain in investor loans.
"The weakness in construction loans in November is largely a legacy of the very low sales volumes that home builders experienced in the first half of the year," said Geordan Murray, HIA economist.
This drop could be linked to the drop in construction approvals. Recent ABS approval figures show that overall building approvals have dropped by 20%. In New South Wales, the number of approved private sector homes decreased 3.4%.
Despite this, Murray also believes that the housing market should stabilize this year if the firm commitment of homeowners and investors remains.
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