Sales of new homes have fallen for the fourth month in a row, prompting a peak housing construction organisation to warn of the risk to the industry if interest rates are pushed up too soon.
The number of sales of new homes fell by 2.6 per cent to 6,887 in August, the Housing Industry Association said in a statement.
The fall followed a 7.1 per cent drop in July and brought the decline since April to 19.7 per cent.
Sales in August were 20.5 per cent below the level recorded a year earlier in August 2009 and at their lowest point since December 2008.
HIA chief economist Harley Dale said earlier interest rate increases and the unwinding of fiscal stimulus measures had quelled demand for new housing.
At the same time there had not been enough progress in reducing "supply side barriers" that increase the cost of new housing.
"An array of leading housing indicators, including new home sales, is signalling a fall in housing starts in 2011, even if interest rates remain steady," Dr Dale said.
That would mean new home construction commencements would have risen in only two years out of 10 - 2002 and 2010, he said.
"A premature hiking of interest rates would exacerbate the impending decline in new home building.
"At the same time, renewed weakness in new housing highlights the opportunity to act, rather than an excuse to sit back, when it comes to creating a more flexible and less costly regulatory environment than the one which is currently pushing people away from new housing towards existing property," Dr Dale said.
The board of Reserve Bank of Australia is set to hold its monthly monetary policy on Tuesday next week.
The futures market currently gives a increase in the cash rate to 4.75 per cent next week about a two in three chance.
In the month of August 2010 detached new house sales fell by 20.3 per cent in New South Wales.
Sales also fell in Queensland, down by 2.8 per cent, and in South Australia, down by 5.6 per cent.
Sales increased by 2.6 per cent in Victoria and by 2.7 per cent in Western Australia.
