New home sales are far from being a boom market. They have declined in September, with detached house sales falling to their lowest point in eleven years, according to the Housing Industry Association (HIA). The HIA conducted a survey of Australia's major residential builders and found a 3.5 per cent fall in the number of new homes sold in September, with a 14 per cent decrease in the September quarter. This was clearly high on the mind of the Reserve Bank of Australia which cut interest rates after its November meeting. A consensus view amongst economists is monetary policy is arguably the most powerful economic tool in modern open economies, but interest rate cuts still take time to boost the economy. Some of the numbers have been affected by once off events such as the Queensland floods and storms and which caught up with a rise of 5.7 per cent in September, but sales fell in each of the other four mainland states. Notably, Victoria posted the largest monthly fall with sales declining by 6.6 per cent in September. Meanwhile in terms of the pipeline of development, Australian residential building approvals fell 13.6 per cent to 11,889 units in September, seasonally adjusted. More recently in late November, banks have been quietly lowering their deposit rates - a strong indication that interest rates may continue to decline into 2012. The hope by developers and mortgage brokers is that we are seeing the base as far as housing credit is concerned and that will pick up in the next few months; so some of that will come back to home building approvals. Investors may at some point form the view that Melbourne will emerge from a slump, coming from the expected boost in spending from interest rate cuts as well as the decline in supply. House production in Melbourne's growth corridor outer suburbs had decreased after peaking at 18,900 lots in 2009-10, with analysts now saying those boom years were unsustainable. Some reports indicate that productions will decline to as little as 13,000-15,000 lots per annum by 2013-14. As always property prices are driven by supply and demand factors with population growth now looking stable going forward after a decline in immigration in the years 2008-2010.
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