Four interest rate cuts in 10 months have failed to lure to would-be home buyers into the housing market.
The number of home loans approved in July fell one per cent, according to figures released by the Australian Bureau of Statistics today.
According to the ABS, 44,804 home loans were approved in the month, in seasonally adjusted terms, a 2.7 per cent drop compared to November 2011 when the Reserve Bank of Australia began cutting interest rates.
CommSec economist Savanth Sebastian said the figures reflected a lack of confidence in the housing sector.
"I think the rate cuts will help over the longer term but, at the moment, I think it comes down to weak consumer confidence and investors remaining relatively cautious in this environment,” he said.
He said would-be buyers were hoping house prices would continue to fall while would-be sellers were
holding off putting property on the market in the hope prices would begin to rise.
According to property research firm RP Data, Australian house prices have fallen an average of 0.6 per cent in the eight months to August, following a 3.8 per cent fall in the 2011 calendar year.
The RBA cut the cash rate by 1.25 percentage points between November and June.
It is currently sitting at 3.5 per cent.
Master Builders Australia chief economist Peter Jones said the figures shows further interest rate cuts are needed.
"The industry needs the rate cuts to take hold and provide the spark for a recovery for the housing sector,” he said.
"If as suspected, the previous rate cuts have failed to take hold, the Reserve Bank needs to act."
Macquarie senior economist Brian Redican said home loan approvals figures suggested the housing construction sector was unlikely to pick up until 2013.
"It does suggest that any recovery in housing activity will be a 2013 story rather than in the second half of this year,” Mr Redican said.