Warning signs build as new home sales slump, says REIQ

The Real Estate Institute of Queensland (REIQ) is warning that Australia risks turning a much-needed recovery in new housing supply into a building slump, as new home sales fall and major residential developers report weakening buyer demand.

New figures reported by Mirvac show it sold 429 homes in the three months to 30 September, down from 619 in the equivalent period last year, a fall of almost one-third.^[1]

It follows weakening buyer activity reported by Stockland. In its September quarter update, Stockland recorded 1,506 net residential lot sales, compared with 2,117 a year earlier, while buyer inquiries had fallen substantially.^[2]

REIQ CEO Antonia Mercorella said the figures were alarming and should be treated as an early warning sign.

“We were finally starting to see some momentum building behind new housing supply, and now we’re seeing it rapidly lose steam,” Ms Mercorella said.

“When some of Australia’s biggest residential developers are reporting sharp falls in sales and buyer inquiries, we need to take notice. Today’s weaker demand risks becoming tomorrow’s housing shortage.”

The decline in new home inquiries and sales follow other signs of a cooling housing market. ABS figures show the number of new dwelling loan commitments nationally fell 5.4 per cent in the June quarter, with investor loans dropping 8.6 per cent. Queensland investor lending fell 10.1 per cent.^[3] The total value of Australia’s residential dwelling stock fell by $34.1 billion in the June quarter, while the national mean dwelling price declined by $8,200.^[4]

Ms Mercorella said the construction slowdown was the result of a perfect storm – rising interest rates, diminished borrowing capacity and unexpected changes to property taxes.

“We are operating in an environment where uncertainty is high, and buyer confidence is low. Not surprisingly, the impact of this is that buyers are nervous about buying off the plan,” she said.

“At a time when Australia needs confidence and investment to deliver more homes, poorly thought-out policy changes risk pulling in the opposition direction.

“The danger is that measures intended to improve housing affordability and stimulate new homes have the unintended consequence of weakening investment, undermining new construction and ultimately constraining supply.”

She said the federal government’s plan to boost new construction by retaining negative gearing for new builds for investors was flawed because it failed to recognise the critical elements of investor confidence and choice.

“When deciding whether to commit their money to property, investors consider longer-term returns, resale value and the direction of government policy,” Ms Mercorella said.

“Trying to steer investors towards one segment of the market while making investing in established property less attractive, assumes investors will simply go where government wants them to go. In reality, some may choose not to invest in housing at all.

“A sustained contraction in new housing would have significant consequences on meeting supply targets and could create affordability issues for buyers and tenants.

“That is the unintended consequence we have been warning about, and these emerging figures should give policymakers serious pause for thought.”

ENDS

Media enquiries:

Claire Ryan, Media and Stakeholder Relations Manager, The Real Estate Institute of Queensland

M: 0417 623 723 E: media@reiq.com.au

Read another media release from the REIQ: Healthy vacancy rates kept at bay, says REIQ.

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