Poor new home sales data shows ‘housing shortage not solved’

DESPITE a small increase in September, new home sales are at their lowest quarterly level in 18 months, according to the Housing Industry Association.

New home sales showed a 3.4 per cent increase last month but fell by 17.5 per cent in the September quarter, reversing the recovery that commenced in 2025.

The HIA New Home Sales 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 recovery in new home sales that followed the interest rate reductions in 2025 has now reversed, with sales in the September quarter now 16.4 per cent lower than a year earlier,” HIA chief economist Tim Reardon said.

“This deterioration has occurred amid higher interest rates, increased taxes and broader economic uncertainty.

“It is also likely that the increase in the cash rate in the month of September 2026 will further weigh on new home sales.

“The modest increase in sales in September should not be mistaken for a turning point in the market.

“Industry feedback indicates that display village visits, enquiries, leads and conversions remain very weak.”

Reardon said the cancelation rate has increased from below 10 per cent early this year to 13.6 per cent in September.

“A rise in cancelations is typical when interest rates are rising as home buyers that had conditional finance to build a new home, have that finance removed,” Reardon said.

“There are significant lags between the sale of a new home, building approval and the commencement of construction.

“The increase in new home sales during late 2025 and early 2026 created a pipeline of work that is only now appearing in the ABS building approvals and commencements data.

“The recent improvement in commencements is welcome, but it should not be mistaken for evidence that the industry has entered a sustained recovery.”

Reardon said the deterioration in new home sales suggests the improvement in home building activity will be short-lived unless market conditions improve.

“This is particularly concerning when Australia commenced construction of just 204,500 homes in 2025-26, well below the 240,000 homes required annually to meet the Housing Accord target,” he added.

“The underlying shortage of housing has not been resolved.

“Falling established home prices and rising costs of delivering new homes are making new construction increasingly difficult to justify.

“Putting the industry through another boom-bust cycle will only make it harder and more expensive to increase housing supply when market conditions recover.

Rearson said higher interest rates will not build more homes.

“Nor will increasing the tax and regulatory burden on new housing,” he said.

“Without reforms that reduce the cost of delivering new homes, Australia will continue to move further away from achieving its Housing Accord target.”

All states recorded a decline in new home sales in the September quarter.

The largest decline was in Queensland (-26.3 per cent), followed by Victoria (-23.3 per cent), NSW (-17.4 per cent), South Australia (-7.6 per cent) and Western Australia (-1.7 per cent).