Australia's residential market continues to be sluggish with high interest rates and a lack of properties contributing to a fall in new homes sales in August, a survey has found.
The Housing Industry Association (HIA) survey found new home sales fell 1.3 per cent in August, following a 7.2 per cent decline the previous month.
Sales of detached houses fell 2.4 per cent in August, the seventh monthly fall in a row.
Multi-unit sales rose by 5.8 per cent in the month, which was only the second increase in calendar 2008 so far.
HIA chief economist Harley Dale said tight conditions in the rental market will continue because not enough houses are being built.
"The outlook for continued very low rental vacancy rates will unfortunately exacerbate the amount of 'rental rage' that is now being reported," Mr Dale said.
Yesterday, the Real Institute of NSW said the rental vacancy rate August was 1.2 per cent, unchanged from July.
Mr Dale also said a lack of available housing and high interest rates are hindering first home buyers trying to enter the property market.
"A shortfall of 45,000 dwellings this year alone is showing up in significant financial distress for lower income renters," he said.
"Further interest rate deductions have a vital role to play in complimenting supply boosting policies.
"A further rate cut at the start of October is imperative in the current fragile economic climate."
The Reserve Bank cut interest rates at its board meeting on September 2 by a quarter of a percentage point to seven per cent to help stimulate the flagging economy.
It was the first easing of monetary policy since December 2001.
Financial markets are pricing a further quarter of a percentage point cut after the next RBA board meeting on October 7.
In August, Western Australia weathers the largest fall in homes sales, down 5.6 per cent after after dropping 24.5 per cent in the month before.
Queensland recorded a 4.7 per cent fall in new home sales while South Australia dipped 4.3 per cent lower.
New home sales in NSW rose one per cent while Victoria posted a modest 0.3 per cent gain.
The survey was compiled from a sample of Australia's 100 largest residential builders.
