Hidden inflation number new home buyers must see

New home price inflation softened to 2.8% during the 12 months to November, following a 4.2% rise for the year to October, according to the latest Consumer Price Index (CPI) data reported by the Australian Bureau of Statistics (ABS) on Wednesday.  

It was the lowest level of annual new dwelling price inflation since July 2021.  

REA Group senior economist Paul Ryan said easing new home price costs was good news for new home buyers and home builders.  

“There has been a lot of uncertainty about new home costs increasing over the past few years and the fact that costs are not increasing as much, and also potentially falling a little bit, will likely encourage more people to consider the new home market,” Mr Ryan said. 

Construction cost rises have been easing after the supply constraint shocks seen in recent years, resulting in slowing inflation on new home prices.  

Historically-low home building approvals and lower new home demand had also eased pressure on home builders, meaning less competition for tradespeople and other labour, he said.  

Builders have also been offering discounts and promotions offers to entice buyers.  

REA Group senior economist Paul Ryan says easing new home price inflation was good news for home buyers. Picture: supplied

He noted that the easing cost of construction and increasing prices of existing homes in some markets around the country will make new home projects more viable and lead to more homes getting built.

The easing new home price inflation is also a positive sign for the Reserve Bank and its ongoing battle against inflation. 

“It's one of the key disinflationary drivers that's pushing inflation back down to the RBA target and it gives the RBA more space to consider interest rate cuts, whether it's in February or May,” he said.  

The latest CPI data revealed inflation sitting at 2.3% for the year to November, slightly higher than previously reported but still inside the RBA’s target zone.   

The trimmed mean inflation, which excludes the most volatile changes and is the RBA’s preferred figure to work off, fell to 3.2% in the 12 months to November.   

Green shoots amid building approvals fall 

The easing new home price inflation comes as national home building approvals fell by 3.6% month-on-month in November, according to ABS figures released on Tuesday.  

Daniel Rossi, ABS head of construction statistics, said the fall in dwellings approved in November was across all residential building types.  

“Approvals for private sector houses fell 1.7%, while private dwellings excluding houses dropped 10.8%,” he said.  

"Despite the fall, approvals for total dwellings remain 3.2% higher than November 2023." 

National home building approvals fell by 3.6% month-on-month in November. Picture: Getty

While approvals fell on a monthly basis, Housing Industry Association senior economist Matt King said approvals were up by 7.2% over the three-month period to November.

“Building approvals data reveals the ongoing strengthening in the new home building market and continue to point to a moderate-pace recovery in 2025,” Mr King said. 

“Following a period of prolonged weakness, there are signs of life again in building approvals, which is pointing to a nascent recovery in new home building.” 

It comes as home prices across Australia fell for the first time in two years last month, according to PropTrack.  

The national median home price declined by 0.2% month-on-month in December, although home prices were up 4.7% over the past year. 

This article first appeared on realestate.com.au and has been republished with permission.