HOME buyers are starting to feel the squeeze of successive interest rate rises as work on new houses begins to cool.
New home sales faltered in November, falling 0.2 per cent, Housing Industry Association figures released yesterday showed.
That deepened a 2 per cent drop over the three months to November 30 and was down 11 per cent compared with the same period in 2009.
The Reserve Bank raising interest rates by 1 percentage point last year, along with some banks adding a further 20 basis points, and a cut in the first home buyers grant, had stifled demand, the HIA said.
HIA chief economist Harley Dale predicted the housing sector would weaken further this year. But he said the strengthening Australian dollar might give mortgage holders some short-term relief.
Economists believe the Aussie will not fall against the US dollar until the end of March, keeping inflation in check and delaying any interest rate rises.
''Obviously a period of interest rate stability is going to be beneficial to the housing sector and might hopefully prevent a weak 2011 from becoming even weaker,'' Dr Dale said.
''But I suspect we will probably see some renewed weakness in housing indicators over the next three to six months as we see the lag impact of the November rate hikes and as we also continue to struggle with an environment where finance is very hard to obtain.''
The Reserve Bank raised its benchmark cash interest rate to 4.75 per cent at its November meeting.
In that month, new house sales rose 6.2 per cent in New South Wales and 1.5 per cent in Western Australia. But sales fell 0.2 per cent in Victoria, 10.4 per cent in Queensland and 0.8 per cent in South Australia.
Dr Dale said the federal government's tripling of the first home buyers grant to $21,000 for new houses raised building activity in late 2008 and 2009 but sales had halted with the reversion of the grant to $7000 last year.
''We didn't really see a ramping up of second, third and fourth home buying activity to fill the void and so the net outcome was the deterioration in home building conditions,'' he said.
Sales of multi-unit housing rose by 8.1 per cent in November.
