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AAP

2013-01-24

New building activity in Australia could struggle to gain momentum early this year following an industry study showing a fall in residential land sales.

The Housing Industry Association (HIA) residential land report, released on Thursday, showed a fall of 17.8 per cent in residential land sales in the September quarter of 2012.

This followed a rise of 23.3 per cent in the June quarter.

HIA chief economist Harley Dale said the report signalled a challenge to Australia's building sector in the months to come.

"This latest update highlights the uncertainty around whether the new home building sector can mount a recovery that is both sustainable and of the magnitude Australia's population and economy require," he said.

"Overall, residential land sales - a key leading indicator of housing starts - signal a rocky road for any new home building recovery in 2013."

Dr Dale said policy reform was needed to encourage recovery in the sector.

"One catalyst for the emergence of a strong new home building recovery would be the reduction in the cost of new housing, including serviceable land, which is brought about by disproportionately high and inefficient levels of taxation," he said.