A modest rise in new home sales in October shouldn’t discourage the Reserve Bank of Australia (RBA) from cutting the official cash rate next week, according to the Housing Industry Association (HIA).
"A 3.4 per cent increase in new home sales in October is a modest result, but at least it is a move in the right direction,” said HIA chief economist, Harley Dale.
The HIA New Home Sales report, a survey of Australia's largest volume builders, showed a substantial 31.4 per cent increase in the sale of multi-units in October and this delivered the headline rise for the month. Detached house sales fell by two per cent in October, which the HIA said was the fifth decline in six months.
“Scratching below the surface, new home sales in October were a mixed bag,” Mr Dale said.
“Within the weak headline result for detached houses there were modest increases for New South Wales, South Australia, and Western Australia, albeit from very low bases.
“Detached house sales in Victoria were a big drag on the aggregate result in October, slumping by 12.1 per cent. If you take that result out of the mix then detached house sales actually posted a rise of 2.4 per cent.”
“We need to see evidence emerge in coming months of a stronger, broader based recovery for new home building. The fact we don’t have that evidence now is precisely why the Reserve Bank of Australia should cut interest rates next Tuesday.”
In October the number of seasonally adjusted new detached house sales increased by 4.7 per cent in New South Wales, 3.2 per cent in South Australia, and 3.7 per cent in Western Australia. Detached house sales fell by 4.3 per cent in Queensland.