Housing Industry Association Principal Economist Tim Reardon says the drop is the ‘correction in the market we have been anticipating’.

He added there was "no way the market could sustain itself after operating at record highs for four years".

New figures from the Housing Industry Association (HIA) revealed that sales of detached houses fell by 6.7 per cent in December, while the turnover during the final quarter of 2018 was 14.9 per cent lower than last year.

Geordan Murray, HIA Senior Economist, told WILLIAMS MEDIA tough lending conditions are to blame.

“While declining home prices in Sydney and Melbourne have made home buyers in these markets far more cautious, the ongoing challenges accessing finance that face many would-be home buyers across the rest of the country continue to weigh on new home sales. 

With a large amount of residential building work underway due to the off-the-plan sales during the past years, Mr Murray argued that a high level of building activity would not do much to boost the housing market.

“There is still a large amount of residential building work underway due to residential developments that proceeded with large numbers of off-the-plan sales during 2016, 2017 and early 2018.  

“These off-the-plan sales have been flowing through the build process and many are now in the construction phase. This high level of building activity is masking a deterioration looming on the horizon. 

“The slowdown in sales that occurred throughout 2018 shows that the pipeline of new work coming through during 2019 is set to be considerably weaker than we’ve seen in recent years. Home building activity on the ground is set to decline as the year progresses. 

Mr Murray added it will be interesting to see if the number of new home sales will pick up.

“It will be important to watch the trajectory of new home sales during the first half of 2019. This will give us a clear indication of how the contractionary phase of the home building cycle will play out in the second half of 2019 and into 2020,” concluded Mr Murray. 

New South Wales was the only state where sales did not decline during the month.

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