Rising interest rates and looming tax changes are rattling the housing market as new home sales dropped by almost 18 per cent in the September quarter, a new report has shown.
The Housing Industry Association’s latest report, which surveyed major home builders in Australia’s five largest states, shows new home sales are at their lowest quarterly level in 18 months.
HIA’s chief economist Tim Reardon said there was a 3.4 per cent increase during the month of September, but warned the recovery in new home sales, after rates were reduced last year, has now reversed.
“This deterioration has occurred amid higher interest rates, increased taxes and broader economic uncertainty,” Mr Reardon said in a statement.
“It is also likely that the increase in the cash rate in the month of September 2026 will further weigh on new home sales.”
The Reserve Bank of Australia has lifted the cash rate four times since the beginning of 2026, raising it to its highest point in 15 years.
It comes alongside upcoming changes to negative gearing and capital gains tax that are aimed at reducing the power of property investors in the market.
The largest decline in new home sales was seen in Queensland, which dropped 26.3 per cent in the September quarter.
Victoria followed with a 23.3 per cent drop while news home sales in New South Wales declined 17.4 per cent.
Mr Reardon said cancellation rates have lifted from 10 per cent early this year to 13.6 per cent in September.
“A rise in cancelations is typical when interest rates are rising as home buyers that had conditional finance to build a new home, have that finance removed,” he said.
“The deterioration in new home sales suggests that the improvement in home building activity will be short-lived unless market conditions improve.
“This is particularly concerning when Australia commenced construction of just 204,500 homes in 2025/26, well below the 240,000 homes required annually to meet the Housing Accord target.”
Other research from property analytics firm Cotality shows the median number of days it takes to sell a property has ballooned from 26 to 41 days.
This trend was seen across the nation with median time on the market in Brisbane increasing by 21 days and Perth’s measure lifting 15 days.
Cotality’s research director Tim Lawless said the mounting rate hikes have made buyers increasingly cautious.
“Buyers aren’t just dealing with reduced borrowing power. They’re also weighing up higher repayments and the prospect of further price falls, which is making some reluctant to commit even if they can afford to buy,” Mr Lawless said.
National property prices have declined 3.7 per cent over the September quarter as the four-week clearance rate sits at just 48.3 per cent – well below its 64.4 per cent level in late February.
Read related topics:Housing CrisisInterest Rates