New home sales fall 12.6% in May following NCC 2022 changes

New home sales across Australia dropped by 12.6 per cent in May, following a surge in sales during April due to increased costs related to the National Construction Code (NCC) 2022, according to HIA Chief Economist, Tim Reardon.

“The changes to the NCC 2022 came into effect in Victoria and Queensland for any new home building contract signed from 1 May 2024,” Mr Reardon said.

He noted that these two states experienced a decline in sales during May as a result of the pull-forward in April, which occurred as buyers aimed to avoid the cost increases associated with NCC 2022.

This mirrors the experience of New South Wales in September when it introduced its energy efficiency standards, leading to a fall in sales in the following months.

Mr Reardon explained that the draw forward in sales distorts the new home sales dataset, making it challenging to determine market trends.

He stressed that the increased cost of construction, driven by higher regulatory requirements and interest rates, will further hinder the goal of increasing housing supply and put additional pressure on public housing needs.

“If governments want to increase the supply of homes, they need to, at the very least, stop making new homes more expensive,” Mr Reardon said.

“Lowering the cost of delivering new homes to market is essential to achieving the Australian Government’s target of 1.2 million new homes over the next five years, and improving housing affordability across the country,” he concluded.

In May, sales increased by 15.1 per cent in New South Wales, 14.6 per cent in Western Australia, and 3.2 per cent in South Australia.

However, Victoria and Queensland recorded monthly declines in sales of 41.0 per cent and 10.3 per cent, respectively.

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