New home sales up, affordability down
New home sales have risen even as affordability for Australian homebuyers worsens.
The HIA New Home Sales Report has shown a bounce-back for new home sales in March following a decline in February. The sale of new homes rose a seasonally-adjusted 8.9% for the month, driven largely by a 16.3% jump in multi-unit sales.
“This is another positive update for the residential construction sector. The bounce in March has moderated the downward trend that emerged in the second half of 2015. It’s also consistent with the trend in ABS new home building approvals,” HIA economist Diwa Hopkins said.
Hopkins said the RBA’s decision on Tuesday to cut the official cash rate to 1.75% should provide an added boost to residential construction. Many banks have already lowered their rates in response to the cut.
The rise in new home sales comes as analysis by Moody’s shows affordability has continued to decline over the year, with mortgage repayments now accounting for nearly 30% of the average monthly income.
News Ltd has reported Moody’s findings showing two-income households now devote 27.6% of their monthly income to mortgage payments, up from 27% at the same time last year.
Prime Minister Malcolm Turnbull, speaking to ABC’s RN Drive, conceded that some of the increase in home values leading to deteriorating affordability has been “unwelcome”.
“We have seen very strong very high growth in housing values in recent years. There’s been quite a bit of work done on housing affordability and I’ve led quite a bit of that work in the past going back to 2003. It is very clear that the reason we’ve seen this strong growth - perhaps, in some circumstances, unwelcome growth - in house prices is because we are not building enough houses. In other words, it’s a supply problem,” Turnbull said. He came in for criticism yesterday for suggesting housing affordability could be solved by parents lending the deposit to their children.
Labor has proposed limiting negative gearing to newly-constructed housing, a measure Turnbull claimed would limit supply.
“What Labor is proposing to do with their ban on negative gearing will send house values south, it will constrain the rental market. It will result in a significant reduction in the number of properties available to rent and will result in an increase in rents,” he said.