The recovery in Australia’s home building industry appears to be gathering momentum as the second reduction in interest rates has ignited new home buyer demand.

The Housing Industry Association (HIA) has released the latest monthly edition of its New Home Sales report – a monthly report which is based on a survey of the nation’s 100 largest home building companies across the five largest states.

The report is a leading indicator of construction activity in the detached home building segment of the market.

According to the report, the volume of new home sales increase by 6.9 percent in seasonally adjusted terms during the month of May.

As a result, sales are now at thirteen month highs and are at their highest level since September 2022 with the exception of April 2024 when a rush of sales occurred to beat price rises that were associated with new building code requirements.

Encouragingly, the monthly rise in sales was driven by New South Wales and Victoria – albeit from very low levels.

This is pleasing as conditions in these markets have been subdued until now.

Sales across the two biggest states reached 20 month and 13-month highs respectively.

Turning to Queensland, new home sales remained stable in May following a strong rise in April. Sales in Queensland have trended higher over the past year.

In South Australia and Western Australia, the number of sales fell but remains at high levels.

Moreover, there are signs that trends beyond the latest month are encouraging.

Compared with the previous quarterly period, the seasonally adjusted number of new home sales over the three months to May increased across Western Australia, Victoria, Queensland and New South Wales by 19.6 percent, 16.9 percent, 7.2 percent and 3.6 percent respectively.

Over that same period, South Australia recorded a 5.8 percent decline in sales. However, sales volumes remain at healthy levels in that state.

The data comes amid expectations that a stronger recovery in new home building activity will take hold from the middle of this year.

In its latest forecasts, Australian Construction Industry Forum said that it expected a significant increase in detached house construction activity over the course of 2025/26.

In a statement, HIA Senior Economist Maurice Tapang said that the improvement in new home sales is being driven by  easing monetary policy conditions and strong underlying demand for new homes.

“The volume of new home sales increased by 6.9 per cent in the month of May 2025, to reach the highest level in 13 months,” Tapang said.

“This rise in sales follows the second cut to the cash rate in over four years.

“The monthly increase in new home sales is consistent with demand factors remaining robust, as Australia records low levels of unemployment, strong population growth and rising prices for established homes.”

 

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