New home sales jump in NSW, plunge in QueenslandNew home sales; Consumer sentiment
New detached home sales decline: In seasonally-adjusted terms, new detached home sales fell by 0.7 per cent in February after falling by 2.1 per cent in January. Sales are down by 1.4 per cent over the year.
NSW leads, Queensland lags: The volume of new detached house sales rose by the most in NSW (up by 11.7 per cent), but fell by the most in Queensland (down by 16.3 per cent) during the month of February.
Consumer confidence down: The weekly ANZ/Roy Morgan consumer confidence rating fell by 0.9 per cent to 117.4 last week. Confidence is up by 5.7 per cent over the year and above the average of 113.6 since 2014 and average of 112.9 since 1990.
‘Time to buy a household item’ rebounds: The measure of the ‘time to buy a household item’ increased to +30.2 – the highest level in two months – up from +26.6 in the previous week. The home sales data has implications for banks, retailers, developers, building and building material companies. The consumer confidence figures have implications for retailers, and other consumer-focussed businesses.
What does it all mean?
The Aussie housing market is rebalancing. Property values continue to moderate, especially in Sydney. CoreLogic data shows that home prices across major mainland capital cities have fallen by 1.0 per cent so far this year (to March 23). Despite this, recent data also from CoreLogic shows that the majority of home sales (91.1 per cent in the December quarter) are still generating a profit for their owners.
The latest New Home Sales Report from the Housing Industry Association (HIA) shows that sales of new detached houses are declining. The volume of new sales has been decelerating since residential housing activity peaked in 2016. Residential council approvals remain firm supporting activity, but dwelling commencements are declining.
Detached home sales in NSW lead the nation. While home prices are decelerating in Sydney ( 2.1 per cent over the year to March 23) on the back of investor lending restrictions, the volume of detached house sales has risen in five of the past six months.
The number of new detached home sales declined in the mining focused states of Queensland and Western Australia. The largest decline occurred in Queensland. Falling council approvals (-8.4 per cent over the year to January 2018) are behind the weakness.
While overall economic conditions in the Sunshine State are lagging NSW, Victoria and the ACT, net annual interstate migration (up 19,300 people to September 2017) is the strongest in the country and annual jobs growth (up 110,000 people or 4.6 per cent over the year to February 2018) is only second to NSW.
It’s not all bad news, however, for Queenslanders. According to CoreLogic the proportion of houses in Brisbane reselling at a gross profit was higher during the December quarter. 
Aussie consumers remain cautious. Share market volatility is rising after an unprecedented period of calm in 2017. Last week (to March 23), the S&P/ASX200 index fell by 2.2 per cent to the lowest level in over five months.
Offshore events weighed on local shares. Renewed fears over a trade war between the US and China, concerns over a possible US government shutdown, rising Middle Eastern tensions and a privacy breach at Facebook reduced risk sentiment. The US Federal Reserve also lifted interest rates, as expected.
Even though Australia has for now been exempted from US steel and aluminium import tariffs, concerns over the potential impact on global trade flows and economic activity wasn’t lost on Aussie households. Nearly 33 per cent of our exports go to our largest trading partner China. Reduced global business investment and Chinese demand for our raw material exports could adversely impact our economy.
On a more positive note, improving job security and record jobs growth appears to be encouraging Aussie consumers to spend and save less. In an heartening sign for retailers, the number of respondents keen to buy a household item rose to the highest level in two months last week.
The outlook on household finances over the year ahead was the best in 12 months. Interest rates remain anchored at record lows, an additional support for Aussies contending with elevated mortgage debt and low wages growth.
What do the figures show?New home sales
In seasonally-adjusted terms, new detached home sales fell by 0.7 per cent in February after declining by 2.1 per cent in January. Sales fell by 1.4 per cent over the year.
The Housing Industry Association reported that the volume of detached house sales rose in NSW (up 11.7 per cent); South Australia (up 10.3 per cent) and Victoria (up 4.8 per cent), but fell in Queensland (down 16.3 per cent) and Western Australia (down 9.9 per cent) during February.
No data was published by the HIA for multi-unit sales.
Consumer Sentiment
The weekly ANZ/Roy Morgan consumer confidence rating fell by 0.9 per cent to 117.4 last week. Confidence is up by 5.7 per cent over the year and above the average of 113.6 since 2014 and average of 112.9 since 1990.
Three of the five components of the index decreased last week:
* The estimate of family finances compared with a year ago was down from +9.9 to +6.5;
* The estimate of family finances over the next year was up from +26.6 to +30.2 – the highest level in over 12 months;
* Economic conditions over the next 12 months was down from +9.2 to +1.8 – the lowest level in 18 months;
Economic conditions over the next 5 years was down from +12.8 to +8.7;
The measure of whether it was a good time to buy a major household item was up from +34.2 to +39.9 – the highest level in two months.
The measure of inflation expectations two years ahead increased to 4.3 per cent from 4.1 per cent in the previous week.
What is the importance of the economic data?
The Housing Industry Association releases data on the sales of new homes each month. The HIA collects the data each month from a sample of Australia’s largest 100 home builders. The survey covers around 15 per cent of the home building industry.
The ANZ/Roy Morgan weekly survey of consumer confidence closely tracks the monthly Westpac/Melbourne Institute consumer sentiment index but the former measure is a timelier assessment of consumer attitudes and is now closely tracked by the Reserve Bank.
What are the implications for interest rates and investors?
The Australian housing market continues to rebalance. Home prices are falling in some cities and rising in others. Detached new house sales are decreasing in some cities, but increasing in others.
Either way, we expect residential dwelling investment to remain firm in the first half of this year. Home building has peaked, but we continue to expect the construction cycle to be elongated as supply meets demand amid strong population growth.
Consumers are adjusting to share market volatility, increasing offshore geo-political risks and intense global retail competition. Domestically, consumer spending is still restrained. However, savvy Aussies are taking advantage of aggressive price discounting by retailers and better job security to buy new household goods.
CommSec expects interest rates to be unchanged until at least the December quarter.
Published by Ryan Felsman, Senior Economist, CommSec