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The Reserve Bank of Australia’s recent 50 basis point cut to the official cash rate has done little to encourage people to further invest in the property market, with new home sales remaining flat throughout May, the Housing Industry Association says.
The small increase in home sales of 0.7 per cent during the period was artificially inflated by a 21 per cent jump in the sales of mult-units. However, detached homes dropped by 2 per cent, according to the HIA.
“The impact of interest rate cuts at the end of 2011, together with the announcement of a 50 basis point cut to the official cash rate on May 1 this year, has so far done little to spur new home sales, given the soft outcomes evident for detached houses,” HIA chief economist Harley Dale says.
It is the second consecutive increase in the sale of multi-unit dwellings. However, detached home sales have dropped in four out of five states.
Victoria’s second consecutive modest increase in sales has been prompted by the first home bonus, which ended on June 30.
The $13,000 bonus had run for three years.
“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,” Dale says.
He says that while further rate cuts are warranted, they won’t do “all the heavy lifting”. Instead, government investment and reform is needed to ensure the long-term viability of the property market, he says.
“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,” Dale says.
In May, the number of seasonally adjusted new detached house sales in Victoria increased by 3.9 per cent.
Detached house sales fell by 6.3 per cent in Queensland, 5.5 per cent in NSW, 4.7 per cent in Western Australia and 1.5 per cent in South Australia.