Australian home sales fell for the third successive month in September, despite the first official interest rate cut in seven years, a report shows.
But the Housing Industry Association (HIA) says the federal government's fiscal stimulus package to help first home buyers, and the prospect of more rate cuts, could spur a recovery in the housing market.
HIA data showed new home sales dropped by 1.8 per cent last month, following a 1.3 per cent decline in August.
The latest data - showing declining sales in Queensland, Victoria and South Australia - was compiled after the Reserve Bank of Australia (RBA) cut interest rates by a quarter of a percentage point in September, making the first official rate cut since late 2001.
"The 0.25 percentage point cut in interest rates in early September did little to turn around weak sentiment and the negative impact of higher interest rates over in 2007/08," HIA chief economist Harley Dale said.
Detached house sales are struggling, with the HIA data showing a 2.3 per cent drop in September, marking the eighth consecutive month of decline.
In light of these weak numbers, the HIA welcomed the Rudd government's stimulus package, which will give $1.5 billion to first-home buyers.
"The short-term outlook for detached house construction is not very bright," the HIA said in its report.
"Lower interest rates and a stimulus to first-home buyers should, however, lead to a gradual recovery emerging over the first half of 2009."
The news was more positive for multi-unit developments, which rose 1.2 per cent in September, following August's 5.8 per cent rise.
Mr Dale said the weak home sales figures vindicated the RBA's decision to cut interest rates in October by one percentage point for the first time since May 1992.
"The fact that new home sales were still falling in September, their sixth drop in nine months, confirms the importance of the subsequent aggressive one percentage point cut in rates in early October and the announcement of a fiscal stimulus package," he said.
Mr Dale said the RBA rate cuts in September and October, which took the cash rate to six per cent for the first time since November 2006, would help the housing market recover.
"There is cause for optimism that the worst may be behind us," he said.
"With interest rates on the move down and a tripling of the first home owners grant for new dwellings (to $21,000), we would expect to see a bottoming out in leading housing indicators over the December 2008 quarter."
Economists surveyed by AAP are expecting the RBA to cut interest rates on Melbourne Cup day by a bigger than usual half a percentage point, which would take the cash rate to 5.5 per cent for the first time since May 2006.
Several economists are expecting interest rates to fall to 4.25 per cent by mid 2009, where they were in late 2001 following the September 11 terrorist attacks in the US.
