The upswing in interest rates continues to dampen the mood of many Australians towards home buying, with new home sales and spending intentions both declining over the first month of the spring-selling season.
According to Housing Industry Association (HIA)’s New Home Sales report, the turnout for new homes declined 4.2% in September, marking the third consecutive month of decline.
Over the quarter, new home sales went down 15.7%, making it the weakest quarter since June 2020 when lockdown drove Australia into its first recession in almost 30 years.
HIA chief economist Tim Reardon said these declines reflect the increasing weight that the Reserve Bank of Australia (RBA)’s tightening cycle is placing on home buyer borrowing capacity.
“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,” he said.
“These compounding forces will see sales continue to slow and the full impact of the rise in the cash rate is yet to emerge.”
Mr Reardon said home building is past the pandemic peak and is now set to experience a long COVID slow down.
“Given the longer-than-usual lags in this building cycle, the RBA’s rate hikes to date will similarly take longer than usual to affect the broader economy,” he said.
“Much of the impact of the RBA’s tightening cycle will be obscured until the second half of next year.”
Meanwhile, spending intentions towards home buying also declined over the month, according to CommBank report.
The Homebuying Index was down 4.4% monthly 24.6%, with higher interest rates slowing the demand for home lending.
The decline in the index offset the surprising upside recorded in August.
The CommBank report showed that the number of home loan applications was lower in September both on a monthly and annual basis.
Google searches related to home buying were also lower.
The Westpac-Melbourne Institute consumer index also recorded a slowdown in home buying intentions.
The time-to-buy-a-dwelling index fell 6.4% monthly, driven mainly by the recent rate increases.
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Photo by 1388843 from Pixabay.
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