Housing industry warns of further drops in new home sales in next 2 years

Most expensive median house price in Australia in Sydney at $850,000

Sydney Properties — Properties can be seen along the coastline in the Sydney suburb of Clovelly, Australia, July 19, 2015. Reuters/David Gray

The 10,000 homes in Perth without tenants the past 12 months is just one of the indicators of the weakening Australian housing market. While house prices are rising ahead of the selling season, the fall in new home sales in July was larger than expected.

These number have led the Housing Industry Association (HIA) in Australia to warn of more declines in new home sales in the next two years. The association’s monthly report says there was a 9.7 reduction in new home sales in the seventh month of 2016, ABC reports.

The slump followed an 8.2 percent drop in the previous month. The decline has been noticed by the HIA to be dropping at an accelerating pace, indicating that beginning 2017 there could be a relative sharp contraction in new dwelling starts which would likely last until 2018. It would reverse the gains made the past four years.

HIA noted that the low interest rate has failed to boost the housing market compared to previous years.

Meanwhile, CoreLogic, housing market analysts, says that house prices and auction clearance rats are steadily rising in the lead up to the spring selling season. The increases were felt in Melbourne with the average of 0.8 percent hike, Sydney 0.2 percent and Brisbane and Adelaide 0.1 percent.

News.com.au adds the most expensive median house prices are still in Sydney at $850,000, followed by Melbourne at $599,000. The lowest is in Hobart at $300,000. Despite the high prices, 80 percent of auctioned homes in Sydney and Melbourne were sold last week, while in Brisbane, it was less than 50 percent and in Perth 21.4 percent.

Tim Lawless, CoreLogic head of research, explains, “The upcoming spring season will provide a timely test of the housing markets resilience to a slowdown, with listing numbers expected to show their seasonal rise over the coming months and subsequently auction markets to also see an increase in activity.”

VIDEO: Australian Housing Market Update – released August 2016