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Australian New Home Sales Report Fresh Lows

By Nurudeen Amedu August 29, 2016
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  • Fourth consecutive fall for the release


Australian new home sales have posted fresh lows for the month of July as it fell for the third time in four months signalling a persisting downtrend in the economically vital housing sector. The Housing Industry yesterday reported in its monthly survey of large-volume builders that new home sales fell to a seasonally adjusted 9.7% in July, completely offsetting a previous soar of 8.2% in the month of June.

Australia’s new housing sales has since this year been dominated by a lot of volatility, with sales plummeting from recent peaks. However, housing activity maintains an overall boom and will most likely continue to sustain the very essential construction sector for the foreseeable future.

Detached housing sales also posted a major decline in all mainland states, as South Australia was on top of the list of losers with a 12.6% decline, sales were also reported to have slumped by 8.7% in Queensland, a 6.2% fall was posted for New South Wales, 8.2% fall for Western Australia and 6% fall in Victoria.

"New home construction has been the kingmaker of the Australia economy, but the cycle has peaked," Harley Dale, Chief Economist at HIA said, further adding that, "The short term outlook for healthy levels of new home construction remains intact – calendar year 2016 will be a record year for new dwelling commencements, but the situation could look very different from next year. In all likelihood we will experience sharper falls in new home construction in both 2017 and 2018,"

To most market participants, the recent release however unexpected was not entirely surprising, in light of the previous construction output figures released by the Australian Bureau of Statistics that revealed a more than anticipated slump in the indicator for the second quarter, resulting in a fourth quarter consecutive slump. With the Reserve Bank of Australia cutting its benchmark lending rate to a fresh record low in early August to 1.5%, the second cut this year, to wrestle a very weak inflation.

The Australian dollar was today trading lower against its US counterpart in early trading hours. The AUD/USD exchange rate was 0.4% lower at 0.7533. The pair continues to trade very close to two-week lows. Several market-moving economic events are scheduled this week, giving investors clues about Australian consumer spending and underlying housing market trends. On Tuesday the national statistics bureau will release the latest data on building permits, widely regarded as a bellwether for future construction plans.

The Reserve Bank of Australia will also release a report on private sector credit on Wednesday.

On Wednesday, the Australian Industry Group (AiG) will release the August performance of manufacturing index.

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By Nurudeen Amedu August 29, 2016

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