New home sales soared in November off the back of the first rate cut in two and a half years.
According to the latest JELD-WEN New Home Sales Report by the Housing Industry Association (HIA), 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 New South Wales and Victoria.
"This is a healthier but not unexpected result," HIA chief economist Harley Dale said.
"Only two months earlier in September 2011, detached house sales plummeted to an 11 year low.
"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. At present sales volumes are running at least 20 per cent below what you could conservatively call healthy."
Mr Dale said more rate cuts are needed if a sustained and strong recovery in new home building is to occur.