Most builders expect home building to slow due to Budget policy changes
New home sales dropped 4.6% in June, marking the second consecutive monthly decline, according to the latest Housing Inudstry Association (HIA) New Home Sales report — a monthly survey of the country's largest volume home builders across the five biggest states.
"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," said Tim Reardon, chief economist at the Housing Inudstry Association.
"Despite the decline since the federal Budget, sales in the June quarter remain 4.6% higher compared to the previous year, while sales in the 2025/26 financial year remain 18.4% higher compared to the previous year."
Reardon (pictured right) attributed the softening to three interest rate rises this year alongside uncertainty generated by recent housing policy changes, which he said had prompted many prospective buyers to defer or abandon purchase decisions.
More than 80% of builders now expect new home commencements to fall by at least 5%, with half of those anticipating declines exceeding 10%. The HIA estimates that restrictions on borrowing by some superannuation funds to finance new home construction could reduce detached commencements by between 3.5% and 5%, with a potentially larger impact on apartments.
"This month's New Home Sales report highlights a 50% jump in cancellations of new home sales contracts in June compared to the previous month," Reardon said. "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."
The HIA also warned that around 2,500 contracts signed by self-managed super funds are expected to be cancelled once the relevant Budget legislation takes effect. "Policies that constrain new home supply, such as the prohibition on SMSF's borrowing to building new homes announced as part of the Budget, warrant a clear policy goal and analysis," Reardon 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."
At the state level, Western Australia recorded the strongest monthly result, up 8.1%, while South Australia was broadly flat at +0.5%. New South Wales fell 12.5%, Victoria dropped 9.2%, and Queensland declined 3%.
Over the 12 months to June 2026, Victoria led annual growth at +29.5%, followed by South Australia (+27.4%), New South Wales (+19%), Queensland (+8.2%), and Western Australia (+6.7%).
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