Fall in home sales figures builds case for interest rate cut

A THIRD monthly fall in new home sales has strengthened the case for another interest rate cut when the Reserve Bank meets next week, the Housing Industry Association said on Tuesday.

The HIA's monthly new home sales report, a survey of the country's largest volume builders, recorded a 3.7% fall in September, driven by a 3.5% fall in detached homes sales and a 4.2% fall in apartment sales.

HIA chief economist Harley Dale said the figures showed a "dire lack of confidence towards housing".

"Interest rates have come down since November 2011 and there is a recognition that the home-buying environment has improved in 2012," he said.

"However, households remain reticent to actually make a decision to buy.

"Interest rate cuts should help foster a recovery in new home sales in the December 2012 quarter, along with new home incentives for first time buyers in three states and a nascent recovery gathering legs in Western Australia."

Mr Dale said the worsening confidence in the housing market should be changed by a rate cut when the RBA meets for the penultimate time this year next Tuesday.

The call comes despite cuts of 1.75% from the RBA board since October last year, down to 3.25% from 4.75% in October 2011.