“Sales of new homes across Australia fell by 4.8 per cent in June, to remain at rock bottom levels. This poor result in June leaves sales in the 2022/23 financial year down by 33.2 per cent compared to the previous year,” stated HIA Chief Economist Tim Reardon.

The HIA New Home Sales report – a monthly survey of the largest volume home builders in the five largest states – is a leading indicator of future detached home construction.

“The rise in the cash rate over the past year has seen a significant decline in the volume of new homes sales. This will result in the least number of new homes commencing construction for more than a decade in 2024,” added Mr Reardon.

“The last year has seen the impact of a 4 per cent increase in the RBA’s cash rate filter through to the new home market, compounding the impact of soaring construction costs across the industry.

“A significant number of existing projects are also being cancelled, as buyers find themselves unable to obtain finance after interest rates and construction costs continued upwards since they signed the contract.

“This lack of new work entering the pipeline will result in fewer projects being commenced, and the volume of work under construction shrinking rapidly from late this year.

“This will occur at the same time that Australia has a pre-existing shortage of housing, and overseas workers and students return to Australia in record numbers.

“Sales in New South Wales have fallen more significantly than other regions, as the higher price of a house and land package means this market is more sensitive to changes in the cost of finance. At the other end of the spectrum, sales in South Australia and Western Australia continue to hold up despite the rise in the cash rate.

“Addressing the shortage of housing requires policymakers to stop increasing the cost of new homes through taxes and regulatory imposts. The more homes are taxed, directly or indirectly, the fewer homes will be built,” concluded Mr Reardon.

Sales of new homes in 2022/23 were down across all large states compared to the previous financial year, led by New South Wales (-56.1 per cent), and followed by Queensland (-38.5 per cent), Victoria (-31.2 per cent), Western Australia (-12.1 per cent) and South Australia (-2.8 per cent).