HomeBuilder drives new home sales boom past pre-crisis level

Government incentives have pulled buyers into the property market and low rates may keep them there.

New home sales have surged past pre-COVID levels.

The surging residential market is carrying over into the sale of new homes, with sales running at a higher rate than before the coronavirus pandemic struck.

New home markets have been fuelled by a combination of low interest rates and government stimulus packages with much of the buying driven by first home purchasers.

“New home sales increased in February to be 1.7 per cent higher than February last year, prior to the impact of COVID-19 restrictions on new home sales,” HIA economist, Angela Lillicrap, said.

The HIA report is a leading indicator of future detached home construction and shows the impact of government stimulus packages, which have pushed buyers into the market, but may tail off later this year.

“Sales in the three months to February 2021 were higher by 60.5 per cent than in the same three months the previous year. This strong result reflects the significant impact of HomeBuilder on demand for detached housing,” Ms Lillicrap added.

She said that the federal government’s HomeBuilder was the catalyst for improving consumer confidence in the housing market, although regulators are now watching to ensure it does not spiral out of control.

“A surge in sales was observed following the announcement of HomeBuilder in June 2020, which lead to strong sales through to the end of 2020,“ Ms Lillicrap said.

Last December, there was a near record volume of new home sales as households rushed to finalise contracts to build a new home before the end of the $25,000 grant.

The government stimulus program is still running and the HIA expects the full impact of the extension of the HomeBuilder grant, at a value of $15,000, will not be observed until the end of March.

To receive the HomeBuilder grant, construction is required to commence within six months of signing a contract to build, which could extend how long it will have an impact on the market.

“It is possible that builders will delay the signing of some contracts to allow for greater flexibility and more detailed planning of projects,” Ms Lillicrap said.

The HIA is predicting a surge in sales in March, but said that due to the lower grant offering, the surge would not be as large as the December 2020 lift.

“Record low interest rates and rising house prices are sustaining market confidence into 2021. This strong level of consumer confidence combined with the demographic shift to regional areas is driving ongoing demand for new detached homes,” Ms Lillicrap said.

Sales in the three months to February increased across all jurisdictions compared to the same time the previous year. South Australia was up by 149.7 per cent, followed by Victoria (up 69.1 per cent) and Queensland (up 60.4 per cent). NSW increased by 46.2 per cent and WA was up by 25.1 per cent.

Assistant Treasurer and Minister for Housing Michael Sukkar said the report again underscores the significant impact HomeBuilder has had in driving confidence and demand in the residential construction sector.

In a statement he said HomeBuilder had delivered a secure pipeline of construction work that will keep hundreds of thousands of tradies in work who would have otherwise been facing the unemployment queue.

“The extension of HomeBuilder until 31 March 2021 also ensures there will be a steady pipeline of construction activity through to 2022 to lock in this momentum for the construction sector,” he said.”

“Every new home sale represents more work for our tradies and helps build our comeback from the COVID-19 recession.”