A third consecutive fall in new home sales in September highlights the persistent lack of confidence towards Housing in 2012, said the Housing Industry Association, the voice of Australia's residential building industry.

The HIA New Home Sales report, a survey of Australia's largest volume builders, showed a decline of 3.7 per Cent in September 2012, reflecting a fall of 3.5 per cent in the persistently weak detached housing segment and a 4.2 per cent decline in the multi-unit market.

"The persistent weakness in new home sales in 2012, driven by the Detached House market, primarily reflects another factor conspicuous in its persistence this year - a dire lack of confidence towards housing," said HIA Chief Economist, Dr Harley Dale.

"Interest rates have come down since November 2011 and there is a recognition that the home- buying environment has improved in 2012. However, households remain reticent to actually make a decision to buy. This situation is especially evident in the new home building sector where excessive taxation instils a bias against new housing relative to existing property."

"Interest rate cuts should help foster a recovery in new home sales in the December 2012 quarter, along with new home incentives for first time buyers in three states and a nascent recovery gathering legs in Western Australia," added Harley Dale. "The Reserve Bank of Australia needs to play its part by cutting rates again next Tuesday - a renewed easing of rates in October that is not followed up could add to household uncertainty and, perversely, further damage confidence."

In September 2012 the number of seasonally adjusted new Detached House Sales fell by 1.6 per cent in New South Wales, 6.7 per cent in Victoria, and 3.5 per cent in Queensland. Detached house sales increased by 2.8 per cent in South Australia and were up by 3.1 per cent in Western Australia.