Builders brace for tough times as new home sales hit decade lows

On the back of the HIA reporting new home sales falling to their lowest level in more than a decade, residential builders typically say the market is extremely tough with consumers holding back and unfavourable conditions likely to persist into next year.

New home sales fell 8% in July to 6,428 across the country, the lowest level since January 2000. This follows an 8.7% decline in June, according to the HIA survey of Australia’s major residential builders.

Ryan Stidwill, who heads up RW Stidwill Construction and builds high-end homes on Sydney’s Northern Beaches, says the market is quieter than usual.

He puts this down to factors such as the carbon tax and the current consumer caution.

“It has been tough for the last couple of years – renovations are more popular at the moment.”

Stidwill, who won the 2011 HIA Australian Home of the Year award for a five-bedroom waterfront home on Scotland Island, says seasonality may be a factor and is hopeful that consumer confidence will pick up in spring and summer.

Victoria’s Brian Lee master builder, who won the Australian Townhouse/Villa Development of the Year and who specialises in projects in the Balwyn and Canterbury areas of Melbourne, told Property Observer building activity had dropped off.

“It’s going to be tough going forward. Everyone is struggling at the moment.”

Another HIA award winner, Pat Ryan from Queensland-based Ryan Design homes, which won the Australian project home of the year, told Property Observer the market was “really tough”.

Ryan, who builds homes from Gympie to North Lakes, says he has had to work hard to maintain a reasonable level of activity.

“We have to make sure every inquiry count,” he says.

Wilhelm Harnisch, CEO of the Master Builders Association (MBA), says he is surprised at the lack of recovery given the strong fundamentals of a growing population, strong underlying demand and higher employment.

“We were expecting a recovery by now, but that has not eventuated.”

Based on feedback from members, Harnisch says the biggest factor inhibiting recovery is the lack of confidence in the market, brought about by concerns of higher interest rates and uncertainty about where economy is the heading.

“These are the main inhibitors leading to slower growth,” he says.

Asked what would be required to turn the market around, Harnisch says an improvement in consumer sentiment would be a major factor as well as a signal by the RBA that rates are on their way down.

“We need greater certainty as to where the economy is heading and how the carbon tax will play out.”

The MBA and the HIA are both vehemently opposed to the planned carbon tax with the MBA estimating the tax will add 2% to building costs and HIA expecting it to add $6,000 to the cost of building a new home.

But Not all builders are finding the market tough going.

Jason Agresta, purchasing manager at Modernview homes in Sydney’s Hills district, a finalist in the Australian project home of the year category and NSW winner in 2010, says activity has been “quite good”.

Agresta says he is getting plenty of enquiries, though people are little slower and more careful about making a decision.

Being a new builder and being shortlisted for the award have both helped bring in enquiries from both new home buyers and those seeking custom builds, Agresta says.

“We’re looking to double our capacity and are currently building a display home.”

This article first appeared on Property Observer.