HomeBuilder grants driving rebound in new home sales

New home sales data is beginning to show the impact of the federal government’s HomeBuilder initiative, but a strong rebound in June has not fully offset the transaction slowdown of the previous three months.

Housing Industry Association data showed new home sales rose by 77.6 per cent in June, bounding back from a record-low result in May, at a time when COVID-19 related lockdowns had all but ground the industry to a halt.

HIA economist Tim Reardon, however, said he was cautious of over-interpreting the June figures, with data from July and August needed to have an accurate assessment on the impact of the HomeBuilder scheme.

At the beginning of June, Prime Minister Scott Morrison announced $25,000 grants would be made available to those seeking to build a new home, part of the federal government’s initiative to facilitate a tradesperson-led economic recovery.

Mr Reardon said that the June data showed the HomeBuilder scheme would help protect construction jobs in the second half of 2020 and into 2021.

“New home sales fell to their lowest level on record in March and continued to fall in April and May,” Mr Reardon said.

“Without intervention, a significant contraction in the volume of work on the ground would have occurred in the second half of 2020, leading to a contraction across the wider economy.

“Up to half a million jobs were at risk.”

The HIA data showed improvements in sales occurred in all states, with Western Australia recording the largest improvement, as sales rose by 211.2 per cent in June.

WA’s state government also pitched in with additional stimulus in June, offering a $20,000 grant to anyone signing up to build a new house.

South Australian new home sales were up 157.1 per cent in the month, Victorian sales rose 47.8 per cent, Queensland’s were up 43.3 per cent, while New South Wales new home sales increased by 12.6 per cent.

On the flipside, Mr Reardon said cancellation rates remained elevated, at 23 per cent.

“This suggests there are still many households that have made the decision not to proceed with a previous new home purchase in light of the changed economic conditions,” Mr Reardon said.