New home sales slump

July’s 9.7pc fall in new home sales has reinforced warnings the cycle may have peaked and a downturn lies ahead.

New apartments on sale in Sydney.

New home sales slumped in July, offsetting a sharp gain in June and strengthening calls that the cycle may have peaked.

The latest Housing Industry Association new home sales report showed a lacklustre market to begin the new financial year as sales weakened 9.7 per cent, with the industry body warning the numbers pointed to a downturn.

“The short term outlook for healthy levels of new home construction remains intact — calendar year 2016 will be a record year for new dwelling commencements, but the situation could look very different from next year,” HIA chief economist Harley Dale said.

“The overall trend decline in new home sales is accelerating, signalling a relatively sharp drop (from a record high) in new dwelling commencements from 2017.”

New home sales figures declined in all five mainland states through July, with the worst performance a 12.6 per cent retreat in South Australia.

Dr Dale added that the extent of the fall in the coming 12-24 months would look worse than it is given we are coming off record levels.

“New home construction has been the kingmaker of the Australia economy, but the cycle has peaked,” he said.

“In all likelihood we will experience sharper falls in new home construction in both 2017 and 2018.

“The magnitude of decline in new home construction in coming years will of course be exaggerated by where we are coming from — record levels of medium/high density construction and historically healthy levels of detached/semi-detached dwelling construction.”

The industry body said a slowdown would likely be “sensationalised” given the intense scrutiny on the housing sector.