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New home sales plunged in July, falling back to recessionary levels, new figures have revealed.

The Housing Industry Association reported this morning that new sales - as taken from a survey of the nation's biggest builders - fell by 5.6 per cent last month.

It was driven by a 5.5 per cent drop in the detached housing sector while new sales in the multi-unit sector fell by 6.4 per cent.

WA was one of the worst performed parts of the country in July, with new home sales down by 14.4 per cent.

Despite the drop, WA sales in the quarter were 6.4 per cent higher than the preceding three months and 41.7 per cent higher than for the same period last year.

The HIA said that despite last month's fall, detached house sales had been relatively healthy in 2012.

"WA still stands poised to see new home building continue to grow, which is entirely appropriate for the State that is home to the fastest population growth and has a recent and chequered history with housing affordability," the association reported.

"Despite this latest monthly decline in sales, we expect the overall upward trajectory to continue."

Sales were down by six per cent in NSW, 4.6 per cent in Victoria, 8.9 per cent and 8.9 per cent in SA.

However, and despite big falls in consumer confidence, sales were up in Queensland by 11.1 per cent.

HIA chief economist Harley Dale said new home building was the weakest part of the national economy, even after the interest rate cuts of late last year and this year.

He said it was a good time to build with rates low, a competitive market and less pressure on the availability of skilled labour.

"However, consistently weak consumer and business confidence is weighing very heavily on new housing investment, far more so than is the case for retail expenditure," he said.