The HIA New Home Sales report found sales of newly completed homes rose by 2.2 per cent in June, the first rise in new home sales since December 2017.

But despite this increase, new home sales during the entire 2017/18 financial year were actually 5.3 per cent lower than in the previous financial year.

“The increase in sales in June is small in comparison with the fall in sales that has occurred throughout 2018," said Principal Economist at the HIA, Tim Reardon.

New home sales for the first six months of this year are 2.9 per cent lower than in the last six months of 2017. Reardon attributes this weakness to a shift in housing market conditions.

“The deterioration of sales over the financial year reflects the shifts in housing market conditions. The availability of credit has tightened over the past 12 months with banks responding to the decline in house prices and the Banking Royal Commission," Reardon said.

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Last week, BIS Oxford Economics revealed it expects building commencements to drop sharply over the next two years, driven by weakening domestic and foreign investor demand in the face of tougher lending criteria and increased foreign buyer charges.

Related reading: Is construction sector really facing "biggest fall since GFC"?

“Even after this slow-down, overall building activity remains elevated when compared with building levels over the past decade," Reardon said.

New home sales rose in all states except Victoria, which have been in decline since February 2018, and declined a further a 0.4 per cent in June.

“Activity in the Victorian market has reached record levels over recent years and has remained elevated well above historical trends and well in excess of growth in other states.

“The decline in sales in Victoria is well overdue," Reardon said.

"The recent easing in new home sales in Victoria indicates the significant pent up demand for new homes that had accumulated over the past decade has been met by the record levels of building activity. A slowing in the rate of population growth in Victoria is also likely to see new home sales in the state slow further throughout 2018," says the report.

Reardon says the pickup in new home sales across the other states, particularly in New South Wales is a 'welcome reprieve' from a year of slow sales.

Sales in New South Wales were 13.3 per cent lower in 2017/18 than in the previous year. Sales in New South Wales then picked up in June 2018, by 8.3 per cent compared with the previous month, giving a "positive end to an underwhelming year".

Across the other markets, new home sales also rose in Queensland (2.7 per cent) and Western Australia (1.5 per cent) and South Australia (0.2 per cent).

The HIA, which represents the country's largest volume builders, attributes the slowdown to tightening visa requirements, curbing migration.

“Australia’s population growth has slowed over the past three quarters in response to tighter visa requirements that have constrained inward migration. The Sydney and Melbourne markets have seen a decline in their rates of population growth since 1 July 2017," Reardon said.

Official figures for new dwelling approvals, due out later today, are likely to reflect the decline already seen this year in the HIA figures.

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“ABS data shows approvals for private sector detached houses fell dramatically in May 2018. Approvals data typically trails the new home sales data by three to six months and the dramatic fall in approvals in May is likely to be reflected in the June data," Reardon told WILLIAMS MEDIA.

Tightening credit conditions and falling house prices are slowing the market from recent record high levels of activity," the report says.

"While population growth in New South Wales has remained strong, the pace of this growth has slowed, and this could emerge as a key risk of a larger-than-expected downturn in new house building," says the report.

Despite this, the HIA remains positive the decline won't be significant.

"The pick-up in sales in June 2018 shows that this decline is likely to continue to be moderate," the report said.

Read the Housing Industry Association New Home Sales report here.

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Is construction sector really facing "biggest fall since GFC"?

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