Australia’ recovery in new home building continues to gather momentum, with the latest data showing that new home sales are sitting at three-year highs.

Published by Housing Industry Association (HIA), the HIA New Home Sales report is a monthly survey of sales volumes of the largest volume home building companies from across the nation’s five largest states.

The report is a leading indicator of future construction in the detached house segment of the market.

Across the June quarter, the report found that the seasonally adjusted number new home sales across Australia increased by 18.8 percent in the June quarter to reach their highest quarterly level in three years (see chart).

The data provides further confirmation that the recovery in detached home building throughout the nation continues to gather momentum. (By contrast, activity in the multi-unit sector is recovering more slowly as this sector continues to face ongoing challenges.)

Primarily speaking, the recovery has been sparked by easing monetary policy.

After climbing steeply from May 2022 onward, official interest rates peaked at 4.35 percent in November 2023 and stabilised thereon after before two rate cuts in February and May have seen the official cash rate drop to 3.85 percent.

This has unleashed buyer confidence and led to a gradual recovery in detached house approvals which took hold from the middle of last year.

Also supporting the latest recovery in new home sales are high levels of underlying housing demand, continuously low levels of unemployment and end-of-financial-year (EOFY) discounts which builders have offered to attract consumers in what have previously been highly competitive markets.

The strong underlying demand referred to above is being driven by ongoing high levels of net migration and a severe shortage of housing – the latter of which can be seen through ongoing low levels of rental vacancies (1.3 percent nationally as of June.)

Housing Industry Association Chief Economist Tim Reardon welcomed the latest data.

“This is the strongest performance for new home sales in almost three years,” he said.

Encouragingly, quarterly sales volumes increased in all main states.

This was led by Victoria (+27.7 per cent) followed by Queensland (+26.2 per cent), Western Australia (+11.3 per cent), South Australia (+9.9 per cent) and New South Wales (+9.3 per cent).

Whilst volumes in South Australia and Queensland stand at multi-year highs, however, those in Victoria and New South Wales remain low by historic standards.

Partly, Reardon attributes this to high land costs in these states.