HIA calls for interest rate cuts and lower taxes as new home sales reach 15-year low

New home sales fell 5.3% in August 2012 to reach a 15-year low, according to the HIA new home sales report.

The survey of Australia’s largest home builders found a decline of 5.8% in the detached housing segment and a 2.5% decline in the multi-unit market.

HIA’s Dr Harley Dale says the results warrant future interest rate cuts.

"New home sales for August are the latest in a string of soft new housing updates for this financial year, and that follows a very weak year for new home building in 2011-12,” Dale says.

“Indeed, following two consecutive years of decline in new housing starts over 2010-11 and 2011-12, and leading indicators pointing to weakness extending into 2012-13, policy settings in August 2012 were clearly inappropriate.

“A fresh round of interest rate cuts will help rebalance this situation, although financial institutions obviously need to play their role in cementing this outcome.”

He used to the results to call for lower taxes on the building industry.

“It remains the case, however, that rate cuts won’t single-handedly generate the new home building recovery Australia requires. Governments have an important role to play in driving reform measures to lower the excessive tax base faced by the sector."

“In 2012 that reform process remains too slow and in some quarters is virtually non-existent,” adds Dale.

On a city basis, the number of seasonally adjusted new detached house sales fell by 7% in New South Wales, 8.6% in Victoria, 2.9% in Queensland, 2.6% in South Australia, and 9.4% in Western Australia.