New home sales hit a 15-year low in August, adding weight to the calls for the major banks to pass on the Reserve Bank of Australia’s latest rate cut.

New home sales dropped 5.3 per cent to 5,383 in August from 5,682 in July to reach their lowest point since 1997, the Housing Industry Association (HIA) said on Wednesday.

Sales of detached houses fell in all states in August, with the largest declines in New South Wales, Victoria and Western Australia.

Overall, detached housing sales fell 5.8 per cent in the month, and multi-unit sales fell 2.5 per cent.

Continued weakness in home sales indicated Tuesday’s rate cut by the Reserve Bank of Australia came not a moment too soon, HIA chief economist Harley Dale said.

“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,” he said.

“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.”

But cash rate easing was not the only action needed to boost the housing sector in Australia, Dr Dale said.

“Governments have an important role to play in driving reform measures to lower the excessive tax base faced by the sector,” he said.