Modest lift for sales, but outlook remains weak

by Adam Smith01 Dec 2011

New home sales have seen some moderate recovery in October, but a weak outlook should build the case for another rate cut, the HIA has claimed.

The HIA - JELD-WEN New Home Sales Report for October has shown the number of new homes sold during the month increased 5.5%. The volume of detached house sales saw an uplift across four of the five mainland states, with only Victoria posting a decline.

"It is encouraging to see a modest lift in new home sales at the start of the December quarter," HIA chief economist Harley Dale said.

However, Dale argued that sales remained down 8% over the three months to October. He said the profile for new sales compared to long-term averages was even weaker.

"In October 2011 the volume of detached house sales was 29% below the average of the last 15 years," Dale said.

With continuing weakness in the sector, Dale argued that the RBA has fuel to justify a rate cut when it meets next week.

"There is a compelling case for another, larger interest rate cut next week, while any logic behind achieving a swift return to budget surplus in 2012/13 is spurious given current global economic conditions," he said.