The Reserve bank has been urged to keep rates on hold tomorrow as new home sales suffered their heaviest monthly decline in five years.
"There has been widespread anecdotal evidence for some time that new home demand hit a wall in mid-2011 and today’s new home sales figures unfortunately confirm that situation,” The Housing Industry Association chief economist, Dr Harley Dale said.
“Evidence is mounting that weakness in the new home sector is accelerating even with interest rates on hold.”
According to the HIA - JELD-WEN New Home Sales Report, the number of new homes sold in June 2011 dropped by 8.7 per cent, the sharpest monthly decline since May 2006.
In addition, detached house sales fell by 8.8 per cent, the second consecutive fall. The volatile units sector fell by 8.1 per cent in June following a jump of 23.3 per cent in May.
Dr Dale has pointed to the growing speculation that one to two rate hikes will occur before the year end, and the excessive cost of new housing for the disappointing result in June.
“Amidst the roller coaster of interest rate sentiment that has unnecessarily become the norm in 2011, the idea that an imminent rate hike is now unavoidable is misplaced,” he said.
“In terms of government action, reducing the excessive costs of new housing is an important area of the domestic economy to focus on.”