The housing market has suffered a setback to the start of the financial year after enjoying a strong recovery in 2013-14.
New home sales fell 5.7 per cent in July, seasonally adjusted, after a 1.2 per cent rise in June, the Housing Industry Association (HIA) said.
However, HIA chief economist Harley Dale is still expecting 2014-15 to be a strong year for housing construction despite the July fall.
"The 2013-14 fiscal year saw the recovery in new home sales gather strong momentum," he said.
"New home sales and building approvals may have peaked for the cycle, but their levels remain historically elevated."
Dr Dale said more should be done to help increase the supply of housing, which will help the overall economy and keep a lid on house prices.
"A serious focus on addressing conspicuous impediments to new housing supply, such as large and costly planning delays and a significant lack of titled land would of course extend the recovery," he said.
Sales of flats, townhouses and semi-detached houses were down 10.9 per cent in July while sales of new detached houses fell 4.7 per cent.