New home sales plateau
New home sales slipped in May for the first time in 2014, down by 4% on the month, suggesting that investment in new housing may be set to plateau.
Sales of detached new houses were still up by a very healthy +5.7 q/q, but this was offset by falls in multi-unit sales in the month, which declined quite sharply to be down by -5.2% q/q.
Notably, and concerningly, the HIA cited a "shortage of titled land in Sydney and Perth", which will continue to put upwards pressure on those two housing markets, especially since they both have very heavy population growth numbers (click image):
New dwelling sales fell again by another 6% this month in South Australia, down to just 490 in the month of May.
A weak market, where city dwelling prices declined in Q2.
Today's release from the Housing Industry Association (HIA) appears to be consistent other recent data sets - including softening building approvals, and construction finance for owner occupiers which seemingly hit a peak back in March 2014 (click chart):
Housing finance for construction investment actually peaked in February 2014 (click chart):
Established stock under pressure from investors
However, a closer look at today's more timely Financial Aggregates data from the Reserve Bank, tells a slightly different story (click image):
Housing credit growth is tracking at +6.2% year-on-year, having increased by +0.5% m/m in May.
More notably, drilling into the data shows that investor credit for housing jumped by another +0.8% m/m in May to be up a scorching +8.3% y/y.
Because domestic investors are focusing on established dwellings which offer far superior bang for the buck.
A large percentage of new housing stock is presently being sold offshore, perhaps as much as 40% of it in Sydney and Melbourne according to a UBS report today.
The new housing market may be hitting a plateau, but the established market certainly has not done so.
Housing credit for investment as recorded by the RBA's Financial Aggregates has now increased for an incredible 66 consecutive months, and with interest rates stuck down at record lows the trend look set to continue.
Inflation to soften
On a related note, the TD-MI inflation gauge was stuck dead flat at 0.0% m/m in June to be +3.0% y/y.
While the 3.0% reading sits at the top of the Reserve Bank's 2-3% target range, the inflation seen previously was largely a result of the falling Aussie dollar as opposed to labour market pressures or wages growth, and thus is likely to soften again in the 2nd half of 2014.
In fact, this month's 0.0% m/m reading may just be the start of that very softening.
Interest rates on hold for ages yet; established dwelling prices to keep rising.