The sharpest increase in the official cash rate in history has seen new home sales across the country continue to fall.
According to the HIA New Home Sales report, sales activity fell 4.8 per cent in June, to remain at rock bottom levels.
“The rise in the cash rate over the past year has seen a significant decline in the volume of new homes sales,” Mr Readon said.
“This will result in the least number of new homes commencing construction for more than a decade in 2024.”
Sales of new homes in 2022/23 were down on an annual basis across all the larger states, led by New South Wales (down 56.1 per cent), and followed by Queensland (down 38.5 per cent), Victoria (down 31.2 per cent), Western Australia (down 12.1 per cent) and South Australia (down 2.8 per cent).
Mr Reardon said high rates have dramatically reduced demand along with higher prices.
“The last year has seen the impact of a 4 per cent increase in the RBA’s cash rate filter through to the new home market, compounding the impact of soaring construction costs across the industry,” he said.
“A significant number of existing projects are also being cancelled, as buyers find themselves unable to obtain finance after interest rates and construction costs continued upwards since they signed the contract.
“This lack of new work entering the pipeline will result in fewer projects being commenced, and the volume of work under construction shrinking rapidly from late this year.”
He said the declines come at a time when Australia needs more houses than ever before.
“This will occur at the same time that Australia has a pre-existing shortage of housing, and overseas workers and students return to Australia in record numbers,” he said.
According to Mr Reardon, sales in NSW have fallen more significantly than in other regions, as the higher price of a house and land package means the state is more sensitive to changes in the cost of finance.
While at the other end of the spectrum, sales in South Australia and Western Australia continue to hold up despite the rise in the cash rate.
Mr Reardon said the government can also help boost supply by cutting back on the costs that go into new home construction.
“Addressing the shortage of housing requires policymakers to stop increasing the cost of new homes through taxes and regulatory imposts,” he said.
“The more homes are taxed, directly or indirectly, the fewer homes will be built.”