Australia new home sales at 17-mth low in June-HIA

SYDNEY: Sales of new homes in Australia fell 5.1% in June, the second straight month of sizable falls, as higher mortgage rates hit demand while tight credit restrained supply, an industry survey showed on Monday.

The Housing Industry Association (HIA) said its survey of major builders showed sales of private dwellings were at a 17-month low in June. Sales of detached new homes fell by 6.6%, outweighing a 10.3% rise in sales in the volatile multi-unit sector.

HIA chief economist, Harley Dale, said the withdrawal of monetary and fiscal policy stimulus was hurting the sector.

The Reserve Bank of Australia (RBA) lifted interest rates by 150 basis points between October and May, while commercial banks pushed mortgage rates up by more to cover rising funding costs.

The RBA holds its next policy meeting on Tuesday and is considered almost certain to hold its cash rate steady at 4.5% for a third month.

While higher rates were crimping demand, the supply of new homes was also being constrained.

"Supply side obstacles, including a lack of affordable land and tight credit availability for residential development, are weighing down considerably on the new home building sector," said Dale.

"Inaction means that Australia's dwelling shortage will continue to increase, pushing up existing house prices and disadvantaging households seeking to purchase or rent a dwelling," he added.

Unlike the United States, there was never a boom in home building in Australia that left a huge overhang of unsold homes. Indeed, analysts estimate new-home building has undershot demand for several years, particularly as Australia's population growth has been running at its highest in five decades.

That is a major reason home prices fell only modestly during the global financial crisis and have since recovered quickly to reach new record highs. -- Reuters