Building approvals for new houses increased to a new high in May, up by 3.0 per cent to 10,690.
HIA Chief Economist Tim Reardon said it was the strongest month since September 2021.
The Australian Bureau of Statistics released its monthly building approvals data for May for detached houses and multi-units covering all states and territories.
“Even with the monthly decline in multi-units, approvals over the last three months were still up by 8.5 per cent compared to the same quarter a year earlier, led by houses (+11.1 per cent), but also multi-units (+4.6 per cent),” added Mr Reardon.
“The data continues to reflect the good momentum in Australian home building, supported by elevated population growth and low unemployment.
“New headwinds, including rising interest rates, fuel costs and international turmoil, have started to weigh on confidence and are already suppressing dwelling price growth in a number of markets.”
Mr Reardon said there was a narrow window of opportunity to get into the housing market, as home prices had fallen due to the uncertainty created by the Budget.”
“We expect house price growth to return when the noise from the Budget and interest rate adjustments clears,” he said.
“There is only one factor that is more important to new home building than interest rates, and that is market confidence.”
Mr Reardon said households postponed buying a new home if they were not confident about their employment and the state of the economy.
“If market confidence returns quickly, as we expect, then the adverse economic indicators that we are seeing with the decline in home prices and anecdotal reports of a slowdown in home buying activity, will not be observed in future building approvals data.”
He said there were lags between changes in consumer sentiment and this outcome being observed in building approvals data.
“Sales of new homes accelerated in 2025 given the cut to the cash rate,” Mr Reardon said.
“This momentum was maintained until the Budget.
“This ensures that there is a buffer of work already sold but not yet commenced that will ensure builders continue to operate without disruption from the recent loss of confidence.
“Nonetheless, with housing affordability at its worst levels in over 30 years, it is more important than ever that policymakers support housing investment and development by reducing the costs of home building, not increasing them.” s (-0.8 per cent) and Western Australia (-0.1 per cent) saw marginal declines. In original terms, the Australian Capital Territory saw a decline of 42.6 per cent, while the Northern Territory jumped significantly (+51.1 per cent).
