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First rate cut impacts new home sales
Released 11 January 2012

New home sales have rebounded significantly following the first interest rate cut in two and half years, according to the latest HIA – JELD-WEN New Home Sales Report.     

New home sales increased by 6.8 per cent in November last year following a downwardly revised 2.8 per cent gain in October. Detached house sales increased by a relatively healthy 9.8 per cent, driven primarily by a stronger showing in NSW and Victoria.

HIA Chief Economist Harley Dale said it was a healthier but not unexpected result.

“Only two months earlier in September 2011, detached house sales plumbed an 11 year low,” he said.

“From this parlous starting position, and with speculation regarding a rate cut mounting and then delivered upon, anything other than some recovery in sales volumes would have been surprising, not to mention highly disturbing.

“With falling interest rates, a competitive building market, and a greater availability of skilled trades amidst still very soft overall demand conditions, now is clearly a good time to build a new home for those who are financially set to take that decision.

“There is, however, a long way to go to restore new home sales volumes to acceptable levels.”

Sales volumes are presently running at least 20 per cent below what could conservatively be called healthy, according to Dr Dale.

“Interest rate cuts, both those we’ve had and those that are still warranted, provide a starting catalyst for a sustained and strong recovery in new home building conditions,” he said.

“Such a recovery won’t emerge, however, without well-targeted government stimulus and without re-engagement of the policy reform process to reduce the high and inefficient barriers to new housing supply.”

The volume of detached house sales improved in four out of five mainland states in November 2011, rising by 22.8 per cent in NSW, 11.6 per cent in Victoria, 5.7 per cent in WA and 4.7 per cent in Queensland. Sales fell by 11.3 per cent in South Australia.