New home sales across Australia remain at rock bottom, according to data released by the Housing Industry Association this week. 

The HIA New Home Sales report found that sales of new homes in all states fell in the three months to April, except for Western Australia. Over the last year, NSW has seen the largest declines, with sales in the April quarter down by 70.5 per cent on the same quarter in the previous year. This was followed by Queensland (-51.7 per cent), Victoria (-46.3 per cent) and South Australia (-13.7 per cent). Western Australia saw the only increase over this period of 9.8 per cent.  

According to the HIA, the cancellation rate remains elevated, with more than one new home project cancelled for each four new homes sold per month, the highest level since the start of the pandemic. HIA figures show that starts on multi-unit dwellings have fallen from a peak of 118,000 in 2015-16 to around 70,000 in 2022-23.  

KR Peters Director Peter Nicolls blamed the downturn on the RBA's aggressive interest rate hikes over the past year, which has lifted the cash rate from a historic 0.1 per cent to 3.85 per cent, with commentators divided on whether there will be more rate pain to come. He said the collapse of home builders like Porter Davis had also sent shockwaves through the new home market and made many prospective buyers wary about whom to trust.  

"I am not surprised by these results in the new home market," Mr Nicolls said. "Home buyers are being smashed by finance affordability issues and problems beyond their control in the building industry.  "People look at what happened to those Porter Davis customers left with partially completed homes and don't want to be in the same position." To help stabilise the Victorian residential building industry, the state government this week announced a crackdown on companies that don't take out insurance when accepting deposits.  

Victoria's building regulators will have more powers to monitor whether builders are meeting their obligations with tough new penalties for failing to comply. The VBA will audit builders and probe if deposits have been collected and lawfully insured.   

Mr Nicolls said he fears the reforms "won't do anything". "The problem was builders lost the ability to fix prices which they had been able to manage for years. When prices went up 30 per cent plus, there was no margin for it. "I'm seeing that the builders are still in survival mode. Builders have increased their prices to safeguard themselves but they are not writing the sales. A recent report shows that 10,400 dwellings approved in the past two years in Victoria, valued at $4.3bn have stalled and not commenced.  

"A lot of people also have bought off the plan land & property and are now unable to settle because they don't have the capacity to service the loan on the new increased rates." Mr Nicolls said the downturn in new builds had helped support prices for established stock. "Miraculously, prices have held due to lack of stock and demand from migration. At the end of the day, the old rule of supply and demand is still in force."  

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