New home sales drop amid November rate hikes

New home sales fell across Australia in November 2010 amid rising interest rates, the Housing Industry Association (HIA) has said.

According to the latest HIAJELD-WEN New Home Sales Report, the number of new homes sold eased by 0.2 per cent in November last year, with detached house sales declining by 1.1 per cent.

The Reserve Bank opted to lift the official cash rate to 4.75 per cent in November – a move that was followed by higher rate increases at all of the big four banks.

Commenting on the sales data, HIA chief economist Dr Harley Dale noted that new home building conditions weakened considerably over the second half of 2010 and that the November rate hikes had added "further salt to the wound".

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"New home building activity looks set to decline across all states and territories in 2011," said Dr Dale.

"The risk of a sharp contraction in new home building in 2011 is exacerbated by the negative impact on households and small businesses of increases in borrowing costs and by the persistent lack of available credit for small and medium sized new home projects."

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