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

“This month was the strongest for Victoria since April 2024, when buyers rushed to get ahead of the cost increases associated with changes to the National Construction Code,” added Mr Ryan.

“This makes May 2025 the second strongest month of sales in almost three years.

“Strong population growth, low unemployment and recovering household incomes had already seen new home buyers return to more affordable markets like Queensland, South Australia and Western Australia, while Victorians have been held back by higher land costs.

“Two interest rate cuts and the resolution of election uncertainty are now helping more Victorians over the line when it comes to deciding to build a new house.

“The performance over the last three months is the strongest indication yet of broadly improving detached home building conditions in Victoria this cycle.

“Victoria has seen pockets of strong activity in the knockdown-rebuild and custom build segments of the market. With borrowing costs falling and election uncertainty behind us, buyers should increasingly return to the volume segment of the market.

“Unfortunately, there is not yet evidence that the multi-unit segment of the market will also improve soon. Once again detached, and especially greenfield, housing will need to do most of the work to get Victorians into new homes.

“Even with further cuts to the cash rate and improving market confidence, the coming cycle is not forecast to be sufficient to meet government housing targets. Taxes and regulations imposed on the market by policymakers will constrain the peak of the next cycle.

“Foreign investors are forced to pay over $130,000 in stamp duty, land tax and foreign investment fees to build a typical new home in Victoria – almost $100,000 more than a local investor.

“Foreign capital is highly liquid. These punitive stamp duty and land tax surcharges have resulted in foreign investors exiting the market in favour of more open economies.

“Consequently, multi-unit construction volumes have halved since these surcharges started being introduced, meaning these imposts are also likely to be revenue negative.

“Foreign investors have been prohibited from buying existing housing in Australia since 1975. They only build new housing and don’t add to housing demand, as they don’t live in Australia.

“Stimulating housing demand through record inflows of overseas arrivals, while simultaneously penalising those who finance new housing supply, has been one of the worst policy own goals in recent history,” concluded Mr Ryan.

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