Rate rises force new house sales to tumble

Interest rate hikes have stalled momentum in the housing market, with new house sales plummeting 15.7 per cent in the three months to the end of September.

Figures released by the Housing Industry Association show new house sales fell for the third consecutive month in September. Picture: AFP

Interest rate hikes have stalled momentum in the housing market, with new house sales plummeting 15.7 per cent in the three months to the end of September.

New figures released by the Housing Industry Association show new house sales fell for the third consecutive month in September. “New home sales declined by 15.7 per cent in the three months to September, compared to the previous quarter,” the HIA’s chief economist, Tim Reardon, said.

The HIA New Home Sales report – which surveys the largest-volume home every month – found that Reserve Bank rate hikes and increasing costs of building meant more people were abandoning their pursuits to buy new homes.

Sales in most states declined in the three months to the end of September, with Victoria leading the decline – down 20.8 per cent – followed by Queensland (-17.0 per cent), NSW (-16.3 per cent) and Western Australia (-10.0 per cent). Sales only increased in South Australia, up 6.6 per cent. “This data produced the weakest quarter since June 2020, when the national lockdown drove Australia into its first recession in almost 30 years (and) reflects the increasing weight that the RBA’s tightening cycle is placing on homebuyer borrowing capacity,” Mr Reardon said.

“The RBA’s most acute tightening cycle in almost 30 years is occurring at the same time as the industry is experiencing the fastest increase in home-building costs in almost 50 years. These … forces will see sales continue to slow and the full impact of the rise in the cash rate is yet to emerge.”

But after the RBA increased the cash rate in October by 25 basis points to 2.6 per cent, Mr Reardon said the declining new house sales rate would only accelerate. And with longer-than-usual lags in the building cycle, Mr Reardon said, the impact of the RBA rate hikes would most likely only be realised by the second half of 2023.

“These treacherous lags will force the RBA to wait longer to see the easing in price pressures that it desires,” he added.

Originally published as Rate rises force new house sales to tumble