The central bank’s recent decisions to cut interest rates don’t seem to have affected Australia’s housing market, according to an industry study.
The Housing Industry Association (HIA), which represents the residential building industry, said new home sales rose by a mere 0.7 per cent in May, after a 6.9 per cent rise in April.
Much of May’s overall small increase was due to a 21.1 per cent rise in multi-unit sales, while detached house sales dropped by 2.0 per cent in the month.
Multi-unit homes forms a much smaller sector of the market than the more significant detached house division.
HIA chief economist Harley Dale said the weakness in detached house sales indicated that the Reserve Bank of Australia’s (RBA) interest rate cuts had not filtered through to the housing sector.
“It is encouraging to see a second consecutive increase in the sale of multi-units, a result which saw a lift of 11.6 per cent over the May 2012 quarter,” he said.
“However, detached house sales fell in four of five mainland states in May this year. The exception, Victoria, experienced a second consecutive (modest) rise in sales ahead of the ending of the First Home Bonus on June 30th.
“We expect that, through the second half of 2012, the aggregate impact of interest rate cuts in late 2011 and then mid-2012 will, at the very least, put a floor under new home sales, and other leading housing indicators which also remain very weak.”
Dr Dale said the sector would need more than a lower cash rate to gain more ground.
“Government investment and reform is required to complement the helping hand that lower borrowing costs should provide new home building in the second half of 2012, and the federal government should be leading from the front,” he said.