New home sales drop

Detached house sales slip 4.7%, while units rise

Mike King

Mike King is a Fool.com.au Investment Analyst and Writer. He caught the investing bug more than a decade ago, at a time when the U.S. had invaded Iraq and fear reigned in the markets. His initial success as the markets took off encouraged his passion and thirst for knowledge. With 13 years behind him at one of Australia's largest domestic banks, Mike's passion for stocks led him to join a boutique funds management firm, where he stayed for four years. A seven-year stint in equity research at one of the largest investment banks in the world followed that, giving Mike a thirst to pursue his passion further. Mike holds a Diploma in Applied Finance and Investment and a Graduate Certificate in Financial Planning. His passion is to help retail investors invest better, and that passion was one of his primary reasons for joining The Motley Fool Australia in late 2011. Mike has written thousands of articles since joining, including for Fairfax Media, Yahoo!7, Ninemsn and has also appeared on ABC's The Business. You can see all of Mikes' holdings here

Published August 29, 2013 12:38 pm AEST

New home sales have dropped for the first time in five months, in July 2013, according to the Housing Industry Association (HIA).

"There has been strong upward momentum to new home sales since the record lows plumbed in 2012. One monthly fall, while disappointing, does not really change the story," said HIA Chief Economist, Dr Harley Dale. "That having been said, the re-emergence of a sustained decline for new home sales over the second half of the year would obviously be a negative signal for residential construction and the wider Australian economy."

New home sales fell 4.7% in July 2013 – the first fall since a 5.3% drop back in February. Detached house sales slumped by 6.4%, while sales of multi-units posted a strong turnaround from a 17.5% fall in June to a 7.2% rise in July.

Mr Dale said we need to watch the rest of this year to see if growth is coming on strong, or whether the recovery is just at reasonable levels, still well short of healthy. Across the states, Western Australia saw the biggest falls in detached housing sales – dropping 10.8%, perhaps on the back of the end of the resources boom, while Queensland went against the trend, jumping 12.6%, reversing three months of decline.

The sales drop could just be a temporary pause, and building materials companies like Boral Limited (ASX:BLD), CSR Limited (ASX:CSR), James Hardie (ASX:JHX) and Adelaide Brighton (ASX:ABC) will be hoping the next few months results are better.

Foolish takeaway

With record low interest rates, and potentially a new majority government in 9 days' time, consumers could be expected to heave a sigh of relief and start spending again. That would be good news for home builders and building materials companies.

Interested in our #1 dividend-paying stock? Discover The Motley Fool's favourite income idea for 2013-2014 in our brand-new, FREE research report, including a full investment analysis! Simply click here for your FREE copy of "The Motley Fool's Top Dividend Stock for 2013-2014."

More reading

Motley Fool writer/analyst Mike King doesn't own shares in any companies mentioned.

Automatic Renewal

By taking up this offer, you will also be enrolled in our auto-renewal program, which is our way of making your ongoing subscription easier by ensuring uninterrupted service. Don't worry, though – you're not locked in, and can cancel your auto-renewal at any time before each 'anniversary' date without question or penalty.