New home sales fell nationally in December 2011 but picked up in South and Western Australia: HIA

New home sales fell in December 2011, according to the Housing Industry Association.

The survey of Australia’s 100 largest builders recorded a 4.9% decline in seasonally adjusted sales during the month.

“New home sales were essentially flat over the December 2011 quarter, inching up by 0.2%,” HIA chief economist Dr Harley Dale says.

Building approvals will record a fall for the December quarter and new home loans will likely do the same, Dale says.

“Leading new housing indicators therefore ended 2011 on a weak note.”

Detached house sales fell by 7.7% in December 2011 but rose by 2.1% over the quarter. Multi-unit sales jumped by 29.4% in the final month of last year, but dropped by 15.7% over the December 2011 quarter.

“The intensification of bad news regarding Europe, question marks over labour market prospects in Australia, and avoidable delay and uncertainty as to whether banks were going to pass on the Reserve Bank’s second rate cut conspired to drive a fall in new housing contracts as the holiday season approached,” Dale says.

He suggests the weakness revealed in the HIA - JELD-WEN New Home sales report reflects a combination of subdued demand and an excessive cost base driven by high and inefficient taxation.

“Short-term monetary and fiscal policy stimulus together with a revitalised program of longer-term structural reform is required in early 2012,” he adds.

The volume of detached house sales declined in three out of five mainland states in December 2011, falling by 4% in New South Wales, 10.5% in Victoria and 20% in Queensland.

Sales increased by 12% in South Australia and by 6.8% in Western Australia.