New home sales have bounced back, which is good news, and not just for builders.
The Housing Industry Association’s figures on Thursday showed sales continued to rebound in November from falls last winter, to be up nine per cent from the July low.
Unlike the longer, and more substantial, resurgence from the low seen in 2012, the recent recovery has been dominated by multi-unit developments, up by 18 per cent through the year while sales of free-standing houses are up by only five per cent.
The figures tally with the official count of building approvals by local councils published by the Australian Bureau of Statistics every month.
Those figures show a recovery from a decline over the first half of 2014 and confirm the dominance of the multi-unit sector. Approvals in the private sector were up by 11 per cent over the year to November – four per cent for houses and 18 per cent for other homes like apartments and townhouses.
But whatever the split between houses and other dwelling types, those new homes will still generate income for lawyers, real estate agents, removalists, builders, hardware and furniture retailers, landscapers and countless others. And so the pickup in building will spill over into employment and consumer spending right across the economy, not just in the building sector itself.
If the recent mini-trend continues for a few more months it could be enough to push retail sales growth up from its current tepid trend of around four per cent – on an annualised basis – to a headier five or even six per cent.
Against the background of economists getting jumpy about the negative impact of lower commodity prices and the rapidly-fading mining investment boom, and talking up the prospects of an economy-saving interest rate cut, stronger momentum in the housing industry is just what the economy needs.
That’s not necessarily an argument in favour of lower interest rates to spur things along.
At the close of trade on Thursday the futures market was giving a rate cut at the RBA’s policy meeting in early February a one-in-four chance. But it is an argument in favour of the RBA making it clear a rate rise isn’t on the agenda – not even pencilled in.
And it’s a very strong argument in favour of the RBA taking great care not to be heavy-handed in its campaign to avoid risky lending to housing investors.
That’s especially so because about one in five investors at the moment are actually first-home buyers taking the investment route into the market. The economy needs every one of them right now. AAP