The outlook for housing construction is positive despite new home sales rising by just 0.3 per cent in November as upgraders take over from first home buyers, economists say.
New home sales rose by 0.3 per cent in November as a lack of available finance heavily affected the weak multi-unit, medium to high density housing sector, a Housing Industry Association (HIA) survey released today shows.
The positive overall result comes after sales fell by six per cent in October, the survey of Australia's largest home builders shows.
The standout state was Western Australia where detached new home sales increased by 12.1 per cent in November.
Sales were up by 2.7 per cent in New South Wales and 2.6 per cent in South Australia but fell by 1.8 per cent in Queensland and by 3.5 per cent in Victoria.
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The overall 0.3 per cent increase was reflected by a 0.8 per cent lift in detached house sales offset by a 4.9 per cent decline in sales for the multi-unit sector.
BIS Shrapnel senior economist Jason Anderson said more buying from upgraders offset dwindling demand from first home buyers.
"The fact that it was close to flat, or a little bit up in terms of detached houses, says that that transition was happening," Mr Anderson said.
"It's a sign that while the first home buyer demand was probably fading, the upgrader pickup was definitely coming through."
The first home owner's incentive scheme was phased out at the end of the December.
Mr Anderson forecast a further increase in upgrader demand for new homes over the next three to six months.
Anecdotal evidence suggested demand for multi-sector housing improved towards the end of last year due to a higher turnover of established properties. However, downsizing demand was increasing while investor interest was yet to recover, he said. First home buyer demand had held up better in WA than most other states, but that was expected to taper off later in the year.
Commsec economist Craig James said the big picture was more positive than the figures suggested.
"New approvals to build new homes have risen by more than a third since the start of the year while loans taken out to build new dwellings are currently at the highest levels in 15 years," Mr James said.
"The outlook for home construction is clearly more positive than the latest sales figures imply.
"Housing finance and council approval figures both point to a lift in residential building in 2010.
" The latest readings of the economy had not advanced the case for a February rate hike, he said.
"The forward-looking indicators on the housing market remain positive, suggesting that home construction will be one of the key drivers of economic activity in 2010."
HIA chief economist Harley Dale said the very modest result for detached houses signalled that sales activity from investors and upgrading owner occupiers had not yet reached last year's level of first home buyer-related activity.
"The multi-unit sector, meanwhile, continues to look extremely weak as the medium/high density end of the sector faces an ongoing lack of available credit," Dr Dale said in a statement.
Leading indicators were pointing to a recovery in new residential construction in 2010, but questions remained over the magnitude and sustainability of the recovery.
He said there were obstacles blocking the prospect of new home building, including costly planning delays, the re-emergence of land, skilled labour shortages and rising interest rates.
Ray White Real Estate group chairman Brian White said several prime urban sites were ripe for medium to high density development.
But he said there was very little communication between the different levels of government. "There's some fantastic opportunities, some fantastic sites," he said.
