Rate cuts and population growth drive demand, but supply constraints remain
New home sales across Australia climbed by 6.9% in May 2025, reaching their strongest monthly level in more than a year, according to data released by the Housing Industry Association (HIA).
The figures come from the HIA’s monthly New Home Sales report, which surveys large-volume builders across New South Wales, Victoria, Queensland, South Australia, and Western Australia. The report is widely regarded as a forward-looking indicator of detached home building activity.
HIA senior economist Maurice Tapang (pictured) attributed the growth to recent monetary policy shifts. “The volume of new home sales increased by 6.9% in the month of May 2025, to reach the highest level in 13 months,” he said. “This rise in sales follows the second cut to the cash rate in over four years.”
Demand conditions remain favourable, supported by low unemployment, population growth, and escalating prices in the established housing market. However, regional results varied.
In May, New South Wales and Victoria were the only two states to report an increase in monthly sales. These gains came off historically low levels, with sales in both states showing signs of turning after a prolonged downturn.
“Sales volumes in New South Wales and Victoria have been exceptionally weak over the past two years,” Tapang said. “This increase is the first suggestion of an improvement in market conditions in these states.”
He noted that New South Wales recorded its highest level in 20 months, while Victoria hit a 13-month peak, reflecting a modest recovery from previous pull-forwards in 2023 and 2024 respectively. Queensland's sales were relatively flat in May but followed a strong April, continuing a consistent upward trend seen over the past year.
In contrast, South Australia and Western Australia posted monthly declines. Despite this, activity in these markets remains at healthy levels. Western Australia continues to face labour shortages, although efforts such as a $10,000 incentive scheme to attract construction workers are aimed at easing constraints.
Tapang said housing supply challenges will persist even if monetary policy continues to ease. “Even with further cuts to the cash rate, and a recovery in market confidence, there remains a shortage of housing in Australia due to the regulatory barriers to increasing supply,” he said.
Looking at the broader trend, sales for the three months to May were strongest in Western Australia, up 19.6% compared to the previous quarter. Victoria followed with a 16.9% gain, while Queensland and New South Wales rose 7.2% and 3.6% respectively. South Australia, however, experienced a 5.8% drop over the same period.
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