Sharp rise in transactions follows rate cut and policy changes
Sales of newly constructed homes rose by 25.9% in September, according to the latest figures from the Housing Industry Association (HIA).
The HIA’s New Home Sales report, which surveys major home builders across Australia’s five largest states, is regarded as an early indicator of future detached house construction activity.
“This is the largest monthly increase since the final phase of the HomeBuilder grant in March 2021,” said Tim Reardon (pictured top), chief economist at the Housing Industry Association. “This sees sales in the September quarter a more modest 4% higher, to reach its highest quarterly volumes since October 2022.”
The increase follows a series of policy adjustments, including an August reduction in the cash rate, the removal of Lenders Mortgage Insurance (LMI) for first-home buyers, and changes to planning regulations.
The data shows that New South Wales and Victoria recorded the most significant monthly gains, with sales up 34.4% and 34.8% respectively. These states had previously shown limited response to earlier interest rate reductions. Queensland, Western Australia, and South Australia also reported increases of 25%, 14.2%, and 7.5% respectively.
“The rise in sales in New South Wales and Victoria could be a sign that new home building is returning to more average levels, but further data will be necessary to support this view,” Reardon said.
According to HIA, the primary factor behind the upswing is the recent cash rate cut, with additional influences including low unemployment, population growth, and higher prices for established homes. The report notes that more households are opting to build new homes as established properties become less affordable.
“The removal of the requirement for LMI for first-home buyers has seen builders across the country report increased first home buyer activity,” said Reardon, who added that lowering borrowing costs is expected to support new home construction and boost housing supply, without increasing default risk for first-home buyers.
First-home buyers account for about one third of new home construction, playing a key role in expanding housing supply. Reardon noted that recent policy changes may have improved confidence across the market, not only among first-home buyers.
Further reforms, such as faster approvals processes in New South Wales and reduced infrastructure costs, are also contributing to increased supply. Reardon suggested that additional measures, including streamlined planning approvals and expedited environmental decisions, could further support construction activity.
“Australia will likely fall well short of the goal of 1.2 million new homes, but policy levers are starting to move in the right direction in many states,” he said.
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