New home sales have plunged to their lowest since May 1994 in the latest sign of Australia's struggling real estate sector.
Sales of new homes sank 9.4 per cent in March to 5443 homes nationwide, following a 3 per cent rise in February, according to the Housing Industry Association. Monthly sales were in excess of 7500 homes as recently as May.
Will the RBA cut interest rates?
Brexit: Australian impact
Brexit: EU 'disappointed' but life goes on
What will the fallout be from Brexit?
Markets turn volatile as UK leaves EU
Brexit: Sterling takes a pounding
Big Four fail housing competition test
NSW's infrastructure boom
Will the RBA cut interest rates?
BusinessDay reporter Chris Zappone looks at the key factors influencing the Reserve Bank's decision on interest rates.
“Leading housing indicators such as new home sales are pointing to on-going deterioration in already very weak new home building conditions," said HIA chief economist Dr Harley Dale. "That situation is in turn having a major negative impact on manufacturing and services sectors."
House sales fell 9.7 per cent in March, while unit sales slumped 6.9 per cent nationwide, HIA said.
In New South Wales, seasonally adjusted, new house sales tumbled by 9.7 per cent. In Victoria, they fell 4.6 per cent, while in Western Australia they dropped by 12 per cent. House sales sank 15.3 per cent in Queensland in March, the HIA said.
Australia's housing sector, while avoiding the sharp falls in value linked to the financial crisis elsewhere, is yet to recover even as the Reserve Bank cuts official interest rates with another cut expected tomorrow.
Home prices remain out of reach for many would-be buyers, while structural problems at local levels hinder construction of enough new homes to meet demand and keep the building industry expanding.
Home prices have retreated 4.4 per cent in the year to March, amid worries about the strength of the economy.
Sentiment around existing housing has been fragile in recent months, as confidence has waned about the outlook for the economy at home and abroad.
Auction clearance rates in Melbourne - one barometer of demand for the health of the housing market - remained steady last weekend at 60 per cent, from a weekend earlier, according to the Real Estate Institute of Victoria.
In Sydney clearance rates fell to 48.8 per cent last weekend from 58.2 per cent a week earlier, according to Fairfax Media-owned Australian Property Monitors.
In other news out today, housing credit remained at its weakest level 35 years in March, part of a trend that is putting a lid on housing construction.
The Reserve Bank said that housing credit rose only 0.4 per cent in March, equalling its rise in February. However, over the year to March, housing credit grew only 5.3 per cent, the weakest since the data began in 1977.
In the current climate, households have switched to paying down debt rather than increasing their borrowing. Analysts forecast that future rate cuts may not have the same stimulatory effects as in previous cycles because of the increasing reluctance by households to take on more debt.
The market is currently tipping a 25 basis point cut to the Reserve Bank's cash rate as a near-certainty with a 30 per cent chance of a 50 basis point cut.