New home sales hit by rising rates

Rising interest rates and a fall in government assistance has led to a drop in the sales of new homes, an industry body has said.

Research by the Housing Industry Association (HIA) found that new home sales fell by 4.6 per cent in December, the Australian Associated Press reported.

HIA chief economist Harley Dale noted that new home sales rose over the course of 2009, but added that it remained uncertain whether a recovery in residential building could continue past 2010.

The HIA also observed that first-time buyer activity had contributed to a seven per cent increase in new home sales last year.

However, Mr Dale suggested that first-time buyers were now being forced to reconsider their options and compare home loans after government assistance for such buyers was reduced at the beginning of the year.

"It is clear that momentum is coming out of new home sales as the stimulus from first-time buyer related activity recedes," he said.

Last week, research by the Australian Prudential Regulation Authority revealed that the value of bank home loans jumped 17 per cent to $910.5 billion in the 12 months to December 31st as a result of government stimulus measures for first-time buyers.

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