Another new homes sales fall signals tough year ahead – HIA
A new housing industry report records a four-month market slowdown that implies the cooling will continue well into 2027.
SALES of new homes declined for a fourth consecutive month to their lowest level in more than a year, a Housing Industry of Australia report has revealed.
Now, the HIA’s chief economist, Tim Reardon, says the housing market slowdown will extend into 2027.
The HIA report is a monthly survey of the largest volume home builders in the five largest states and is a leading indicator of future detached home construction.
“The new home market cannot absorb further interest rate increases on top of the tax increases announced in this year’s Federal Budget,” added Mr Reardon.
“Sales of new homes fell nationally by 10.0 per cent in the month of August to be 19.3 per cent lower in the three months to August than the previous quarter and 7.7 per cent lower than at the same time last year.
“This is a tangible and significant deterioration in market conditions and confirms that the recovery in new home building that was underway at the start of the year has been interrupted.
“The deterioration is also broad-based. All five states included in the survey recorded a decline in sales over the three months to August.
“The tax increases announced in the Federal Budget have weakened market confidence while three interest rate increases have reduced household borrowing capacity and increased mortgage repayments.
“Falling established home prices and rising construction costs are outcomes of the rise in taxes and interest rates and are making new home projects increasingly difficult to finance.
“It is not possible to isolate precisely how much of the deterioration in new home sales is attributable to higher interest rates, increased taxation or broader economic uncertainty.
“What is clear is their combined effect.
“Investors and households are retreating from the new home market and the pipeline of homes progressing towards construction is contracting.
“Builders are also reporting weaker traffic through display sites, fewer inquiries and declining preliminary commitments, while cancellation rates are rising.
“There was a substantial volume of work in the pipeline when these pressures emerged, which means the deterioration in sales will not be immediately evident in housing commencements and is unlikely to adversely impact commencements of new homes in 2026.
“But today’s new home sales are tomorrow’s housing commencements.
“The decline in sales through the middle of 2026 will mean fewer homes commencing construction in 2027.
“This slowdown will occur without a corresponding reduction in Australia’s underlying need for housing. Population growth, low unemployment and the existing shortage of homes will continue to generate demand for additional housing supply.
“Further interest rate increases would add another constraint to a new home market that is already challenged and the full impact of the rising taxes and rates is still to unfold.
“This is not the time for another rate rise,” concluded Mr Reardon.
In the three months to August 2026, sales declined compared with the previous quarter in all the mainland states, led by Victoria (-27.0 per cent) and followed by Queensland (-20.2 per cent), New South Wales (-17.5 per cent), South Australia (-10.8 per cent) and Western Australia (-8.2 per cent).
