New home sales slumped for a second consecutive period in June to a 17-month low, as rising interest rates continued to wear away demand.

The Housing Industry Association's home sales index plunged 5.1 per cent in June, after a 6.4 per cent decline in May, as the continuing effects of pricier loans blocked new buyers entering the market.

Victoria fared the worst, with house sales falling 10 per cent. New South Wales, meanwhile shed 2.2 per cent. Sales of houses went down 5.2 per cent in Western Australia and 5.1 per cent in Queensland. In South Australia, new home sales backpedalled by 4.2 per cent.

HIA chief economist Harley Dale said the decline in sales emphasised the difficulties facing the housing construction sector.

''Australia's dwelling shortage will continue to increase, pushing up existing house prices and disadvantaging households seeking to purchase or rent a dwelling,'' Mr Dale said.

"Lack of readily available land and hefty infrastructure charges have combined with a chronic lack of development finance to put the brakes on sales and development activity," he said.

Australia faces a 200,000 home deficit according to federal government approximates.

In June, detached homes dropped by 6.6 per cent, while apartment sales plunged 10.3 per cent. The figures come as national home prices measured by RPData-Rismark declined in June marked the first downward movement in 18 months. According to RP Data-Rismark, the median national home price decreased by 0.8 per cent in June, in original terms, from a 0.6 per cent rise in May.

Private house sales nationwide also contracted to a 17-month low, shrinking 6.6 per cent in June to 6,847. Purchases of multi-unit dwellings, meanwhile, climbed by 10.3 per cent.