New home sales steady in February as states show mixed results

Sales of new homes remained steady in February, holding on to the gains recorded in the previous month, according to new data from the Housing Industry Association (HIA).

HIA economist Maurice Tapang said the results followed January’s uptick and reflected a stable economic backdrop.

“The volume of new homes sold in February was relatively unchanged from the last month’s increase in sales,” he said.

The figures are drawn from the HIA New Home Sales report, a monthly survey of Australia’s largest volume home builders across the five biggest states. The survey acts as a leading indicator of future detached house construction.

Tapang said the Reserve Bank’s recent decision to cut interest rates could take time to influence sales trends.

“The RBA delivered its first rate cut in four years on the 19th of February. It may take a few more months to see the effects of this rate cut on the market,” he said.

He noted that economic indicators remained broadly positive.

“A pick-up in sales at the start of 2025 has been consistent with the stable economic conditions arising,” he said.

“Australia’s economy continues to grow, while unemployment remains very low, inflation is easing, and wages are growing in real terms.”

He added that population growth, while slowing, was still historically high, supporting ongoing housing demand.

“Strong economic and household factors will offset the challenges of the higher cost of materials, labour, land and taxes on new homes,” Tapang said.

However, he emphasised that local conditions would shape the recovery in construction activity.

“It will be state and local factors that will determine the pick-up in home building activity across the different regions,” he said.

“Those that are able to help lower the cost of and increase the supply of shovel-ready land will see a stronger increase in activity.”

“On the other hand, in capital cities and regions where the tax and regulatory imposts on land and new home building is high, the volume of new home starts will remain constrained.”

Tapang said recent sales data already pointed to diverging performance across states.

“In the three months to February 2025, new home sales increased in New South Wales by 55.4 per cent compared to the same period in the previous year, off a very low base,” he said.

“This was followed by South Australia (+18.9 per cent) and Queensland (+14.6 per cent).”

Victoria saw a 4.3 per cent drop in sales over the same period, while Western Australia recorded a 20.3 per cent decline, coming off a high base in 2024.