The group’s latest New Home Sales report shows that new home sales dropped 5.3 per cent in February.
“This latest result is a larger than desirable fall,” HIA chief economist Harley Dale said.
“New home sales are losing some of their lustre as a downward trend becomes more firmly entrenched.”
However, Mr Dale said there was no need to be too concerned yet as external factors could have affected the number of new home sales.
“While the monthly result is a soft one, there is no need to loudly ring alarm bells as [this] often seems to automatically occur every time an economic update disappoints,” he said.
“New home sales are down, but far from out. Over the three months to February 2016, the sale of detached houses increased by 1.8 per cent [nationwide]. The sale of multi-units nudged up by 0.8 per cent over the same period.”
In February, detached house sales increased by 1.7 per cent in Victoria and by 1.8 per cent in Western Australia.
Detached house sales fell by 7.4 per cent in New South Wales, 12.1 per cent in Queensland and 3.5 per cent in South Australia in the same month.
Mr Dale said the market needed to be closely monitored, with new home sales and building approvals indicators of the direction of the housing market.
“Stage one of a down cycle in new home building will be moderate, but signs of a sharper contraction in subsequent stages may emerge as the year progresses,” he said.
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