New house sales fell across the country’s five largest states in April as the market continues its downturn, according to the latest figures from the Housing Industry Association.

Sales of new houses were down by an annualised 3.1%.  The largest reduction occurred in Western Australia (-11.6%) followed by New South Wales (-8.2%), Queensland (-2.9%), South Australia (-1.7%) and Victoria (-0.1%).

HIA principal economist Tim Reardon said the price drops in Melbourne and Sydney have taken a toll on the new home market, as purchases are delayed and investors seek other alternatives. Reardon is concerned about access to finance getting more constrained as lenders move with greater caution. “An increase in collateral requirements for borrowers is an obvious reaction to falling house prices, as banks seek to minimise risky loans.”

According to Reardon’s figures, value of housing loans to investors peaked in August 2017 at $152.7 billion in the preceding 12 months. Since then investor loans have been falling steadily, down to $144.2 billion over the year to March 2018 – a drop of 5.6% from the peak.

“Indications are that the growth in FHB participation has slowed after strong growth since July 2017. FHB participation grew in 2017 due to enhanced state government support and the deceleration of dwelling price growth in key markets like Sydney and Melbourne working to make the home purchase more accessible to FHBs,” he said. “Since January 2018 the FHB share has retreated marginally to 17.4 per cent in March.”

Nevertheless, Reardon pointed out that the strong population growth rate, solid employment growth, and improving economic activity are keeping the demand for new homes at elevated levels.

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