A drop in the number of new home sales in September may cause the RBA to hold off on a 0.50 per cent interest rate rise, and favour a smaller quarter-percentage point rise.
New home sales fell by 4.5 per cent in September 2009 following a strong surge in August, the latest Housing Industry Association (HIA) survey reveals.
HIA’s Chief Economist, Dr Harley Dale said there “was a late burst of sales from first home buyers in August ahead of the step-down in the first home buyers grant.”
“But the stimulus to new home sales from the First Home Owner Boost is now on the wane.”
“With the first home segment weakening, further gains in new home sales will hinge on a return of upgrade buyers and investors. The current level of new home sales points to a shallow recovery in residential building which will lag the underlying requirement for new dwellings.”
In an article in The Australian, CommSec chief economist Craig James described the figures as a “welcome reality check”.
Mr. James said the figures in conjunction with yesterday’s inflation data, that had the quarterly rate of underlying inflation at 0.8 per cent, made it more likely that the RBA would raise rates by 25 basis points next week.
This assessment was also backed by UBS, National Australia Bank and ANZ strategists.
Sources: The Australian, HIA
