New home sales crash
I think it's fair to say the Housing Industry Association (HIA) is not-so-quietly seething at market commentary calling for further rate hikes, as new home sales had already crashed by October last year.
New home sales dropped by a further -27 per cent overall in the fourth quarter of 2022.
Quarterly sales were down -67 per cent from the prior year in New South Wales, -50 per cent lower in Queensland, -36 per cent in Victoria, and -31 per cent in Western Australia...even before the latest salvo of rate hikes have begun to take hold.
Hence the HIA sees interest rate cuts as being required later in 2023:
Source: HIA
There's no question that last year's inflation figures were too hot, as the country reopened into the face of some chronic supply issues.
Thomas Devitt argues, however, that home building cost inflation has plummeted, and will continue to do so as new dwelling construction slows, and as materials and tradies become more and more readily available in 2023.
The HIA also reported that some developers are now recording what they have ominously termed "negative sales", as sales contracts are torn up and cancelled.
This doesn't bode well for new dwelling supply or developer insolvencies.
Tim Reardon adds some texture on where and how the trend is underway:
Essentially the challenge here is that there remained a large pipeline of dwellings under construction in Q3 last year, but building approvals and new dwelling commencements are rapidly drying up.
Middle ground view
Some commentators are calling for no further rate hikes, then, while many others expect several further increases.
When there are such competing forces, the safest best is normally somewhere amidst the middle ground, which quite possibly means 25 basis points interest rate increases in February and March apiece, with a pause for breath then more likely to possible in April.
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Somewhat old news here, but the Aussie government's Labour Market Insights report notched further (modest) declines in job advertisements in December.
Source: LMI, Aus Gov
