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New home sales double in December thanks to HomeBuilder

New home sales double in December thanks to HomeBuilder

The volume of new home sales, or future detached home constructions, doubled in December from the number of sales recorded in November, according to HIA.

The latest HIA New Home Sales Report found that in the 20-year history of the survey, this December sales volume was the second strongest month of growth, with March 2001 still retaining top spot.

When comparing year-on-year, new home sales in the December quarter were greater in all regions in Australia versus the December quarter in 2019.

According to the report, South Australia in particular saw impressive growth in new home sales in this time frame, increasing by 188.3 per cent. This was followed by Victoria (103.1 per cent), Queensland (99.9 per cent), Western Australia (99.2 per cent), and New South Wales (61.7 per cent).

HIA.DEC20

Source: HIA New Home Sales Report, December 2020.

HomeBuilder and low rates bolstering new home sales

HIA Economist, Angela Lillicrap, directly attributed this surge in sales to HomeBuilder, the $15,000 government grant offered as part of the Australian economic recovery plan for Covid-19.

  • Home builders looking to spend between $150,000 and $750,000 building or renovating a new home may be eligible for this grant. The maximum cap has been lifted in some areas, increasing to $850,000 in Melbourne and $950,000 in Sydney. The grant dropped to $15,000 from $25,000 on 1 January 2021, and will continue at this rate until 31 March 2021.

Michael Sukkar, the minister for housing and assistant treasurer, noted that the government had received 42,000 applications as of 20 November last year, making these impressive HIA New Home Sales Report results for December not too surprising.

“It is not expected that this remarkable volume of sales will continue into January,” said HIA Economist, Angela Lillicrap.

“The extension of HomeBuilder to allow contracts to be signed before March 2021 with a grant of $15,000 will support the sales of new homes into 2021, but not at this elevated level,” said Ms Lillicrap.

But it’s not just HomeBuilder that’s been aiding Aussies in starting to build their dream new homes. The current low-rate interest environment has helped many home builders nab construction home loans and pushed demand for new homes.

Unlike a traditional home loan, a construction loan is typically for a short loan term, generally around a year, to complete the build. Once the build is completed, the borrower switches to a more typical mortgage. This is sometimes called the “end loan” and helps to pay off the value of the land and any remaining construction costs.

“Low interest rates, improved lending assessment and growth in the price of established homes will also support demand for new homes in 2021,” said Ms Lillicrap.

This, paired with the added financial help of HomeBuilder, have created an ideal environment for new home sales.

If you’re considering developing a new build and taking advantage of HomeBuilder before the 31 March cut off, here are some of the most competitive construction loans on the RateCity database:

Owner-occupier, variable construction loan interest rates (principal & interest)

Home loanInterest rateComparison rate
G&C Mutual Bank Momentum Home Loan1.99%2.01%
Reduce Home Loans Economizer Variable Home Loan2.27%2.29%
People's Choice Credit Union Basic Variable Home Loan2.49%2.49%
P&N Bank & Basic Home Loan2.49%2.49%
Pacific Mortgage Group Construction Home Loan2.49%2.49%

Source: RateCity.com.au. Data accurate as of 19.01.2020.

Investor, variable construction loan interest rates (principal & interest)

Home loanInterest rateComparison rate
G&C Mutual Bank Momentum Investment Loan2.39%2.41%
People's Choice Credit Union Basic Variable Investment Loan2.69%2.69%
Police Credit Union Better Investment Loan2.69%2.74%
Suncorp Bank Investment Back to Basics Special2.79%2.80%
Pacific Mortgage Group Construction Investment Loan2.84%2.84%

Source: RateCity.com.au. Data accurate as of 19.01.2020.

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This article was reviewed by Personal Finance Editor Mark Bristow before it was published as part of RateCity's Fact Check process.

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