Sales of new homes fell across Australia in May following last month's interest rate hike, an industry report shows. The Housing Industry Association's (HIA) new home sales figures released Wednesday showed that the sale of new homes and units among Australia's largest builders and developers fell by 10.1 per cent last month to 8,499 dwellings. Sales of new houses dropped by 11.0 per cent while the sale of multi-unit dwellings fell by 2.9 per cent. The HIA said the data confirmed the industry was struggling in its recovery in the wake of a higher interest rates. The Reserve Bank of Australia (RBA) raised interest rates by a quarter of a percentage point to 5.75 per cent in its first move since March last year. HIA's chief economist Harley Dale said the rate rise combined with fear of another could dampen sentiment towards housing throughout the remainder of the year. "This is a very untimely situation to be in given there is already sufficient supply of housing stock to satisfy demand," he said. "Housing affordability was historically very low and it has now been further eroded. "Low affordability and the lack of a sustained recovery in housing supply will combine to place further downward pressure on rental markets, and they are very tight now." National Australia Bank senior economist David de Garis said initially this looks to be a worrying sign that home sales fell in the aftermath of the rate rise and the May tax cuts. "Note, however, that this is a very volatile series and month-to-month changes of up to 10 per cent are not unusual even in this seasonally adjusted series," he said. "However, if today's reading was followed up by a soft building approvals number next week, that would be a sign that the stabilisation in residential investment may be stalling." HIA's new home sales survey is compiled from a sample of the largest 100 residential builders in Australia. In May, detached house sales decreased by 17.8 per cent in New South Wales and were down by 13.9 per cent in Queensland, 12.2 per cent in Western Australia and 6.2 per cent in South Australia. Victoria was the only state to buck the trend with detached house sales increasing by 4.1 per cent. SOURCE: AAP