Decline in home sales highlights market uncertainty
New report says 'households becoming more cautious in response to higher borrowing costs and increased uncertainty'.
CONSUMER confidence in the housing market has been weighed down by “higher interest rates and policy uncertainty”, according to a new report.
The Housing Industry Association New Home Sales report has concluded that sales of new homes declined for a second consecutive month, down by 4.6 per cent in June.
The report is a monthly survey of the largest volume home builders in the five biggest states and is a leading indicator of future detached home construction.
“The recent decline in sales reflects households becoming more cautious in response to higher borrowing costs and increased uncertainty, rather than a reduction in Australia’s need for homes,” HIA chief economist Tim Reardon said.
“Despite the decline since the Federal Budget, sales in the June quarter remain 4.6 per cent higher compared to the previous year, while sales in the 2025-26 financial year remain 18.4 per cent higher compared to the previous year.
“Households continue to face the cumulative impact of three interest rate increases this year, while uncertainty surrounding recent housing policy changes has encouraged many prospective purchasers to delay, or cancel, major financial decisions.”
Reardon said the consequence of recent policy announcements is that more than 80 per cent of builders expect commencements of new homes to fall by at least five per cent.
Half of these builders expect commencements of new homes to fall by more than 10 per cent.
“The prohibition of borrowing to build a new home by some superannuation funds is estimated to cause a fall in detached commencements alone by around 3.5 per cent to five per cent. It’s likely that the adverse impact on apartments will be much larger,” Reardon said.
“This month’s New Home Sales report highlights a 50 per cent jump in cancellations of new home sales contracts in June compared to the previous month.
“This is likely due to the impact of rising interest rates constraining households borrowing capacity and conditional finance being revoked. It remains too soon for the budget decisions to have this impact on cancellations.”
Reardon added that builders anticipate a further 2500 contracts to build a new home that have been signed by Self-Managed Super Funds will be cancelled in coming months when the Budget legislation comes into effect.
“Policies that constrain new home supply, such as the prohibition on SMSFs borrowing to building new homes announced as part of the Budget, warrant a clear policy goal and analysis,” he said.
“The goal of building 1.2 million homes will become increasing unachievable if the government continues to restrict who can build or finance new homes.
“The coming months will show whether recent weakness in sales reflects a temporary loss of confidence or a more prolonged period of reduced investment among new home buyers.”
By state, Western Australia recorded a monthly increase of 8.1 per cent, followed by South Australia remaining relatively unchanged (+0.5 per cent).
Declines were observed in NSW (-12.5 per cent), Victoria (-9.2 per cent) and Queensland (-3.0 per cent).
Over the 12 months to June 2026, new home sales in Victoria were 29.5 per cent higher compared to the previous year, followed by South Australia (+27.4 per cent), New South Wales (+19.0 per cent), Queensland (+8.2 per cent) and Western Australia (+6.7 per cent).
