Sales of new homes fell by 22.8% in October, as the weight of increases in the cash rate slowed building activity.

HIA research found that sales fell sharply in all regions during October.

New home sales in Queensland were down by 31.9% during the three months to October 2022, compared to the previous three months.

During the same period, new home sales fell 22.8% and 19.6% in Victoria and New South Wales respectively.

South Australia saw the only increase, up by 13.9%.

“Sales of new homes had already fallen 15.8 per cent nationally in the three months to the end of September, due to the increases in the cash rate starting in May 2022,” HIA Chief Economist Tim Reardon said.

“The increase in interest rates is compounding the rise in the cost of new home construction and further reducing the capacity of borrowers to finance the build of a new home.

“Despite the fall in sales over the past four months, there remains a significant volume of home building under way, and many homes still to commence construction. This will ensure that work on the ground remains strong through 2023.”

Reardon said it was very clear, even before the October and November increase in the cash rate started to impact on sales, that the building boom was coming to an end.

He said the full effect of the November 2022 increase in the cash rate was not likely to flow through to new home sales fully until June 2023.

“The consequence of the fastest increase in the cash rate in almost 30 years will see detached home building activity slow to its lowest level in a decade by 2024,” Reardon said.

“If the RBA doesn’t ease the cash rate in 2023, the Government’s goal of building 1 million homes in five years will be very difficult.”