Australia’s new housing market is showing clear signs of recovery, with buyer demand reaching its highest level in four years despite construction and land costs remaining elevated. After a prolonged period of volatility driven by supply chain disruptions, labour shortages, and rapid cost escalation, the market is now entering a more stable phase – encouraging both developers and buyers to re-engage.
Recent data from REA Group indicates that online searches for newly built homes have risen strongly across the country, with the strongest activity concentrated in Queensland, which accounted for 31% of all new home searches in January. This was followed by New South Wales at 20% and Victoria at 18%.
The data highlights a growing preference for house-and-land packages, which represented approximately 80% of all new home searches during the second half of 2025. By comparison, new units accounted for 13%, while land-only searches made up just 7%, reinforcing the trend toward turnkey housing solutions.
Demand Rebounds After Construction Industry Challenges
According to REA Group senior economist Anne Flaherty, the resurgence in demand reflects improving confidence following several difficult years for Australia’s residential construction sector.
The industry faced significant disruption between 2021 and 2023, when construction costs surged by more than 20% nationally. Key drivers included:
• Global supply chain bottlenecks impacting timber, steel, and concrete pricing
• Labour shortages linked to reduced migration and high project volumes
• Fixed-price building contracts that became financially unviable for many builders
These pressures led to widespread builder insolvencies and project delays, causing uncertainty among buyers and developers.
However, Flaherty notes that conditions are now stabilising.
“We are seeing more prospective buyers return to the market as cost pressures ease and policy support for first-home buyers expands,” she said.
Building Costs Still High – But Growth Has Slowed
While construction costs remain significantly above pre-pandemic levels, the pace of increase has moderated considerably. Industry data suggests annual cost growth has slowed to approximately 3–4%, closer to long-term averages after peaking at double-digit rates.
This shift toward pricing stability is critical for buyer confidence. Over the past two years, one of the largest barriers to new construction has been uncertainty, particularly around build timelines and final contract costs.
Greater predictability is now allowing developers to reprice projects more accurately and reintroduce fixed-price contracts, making new builds more accessible to both investors and owner-occupiers.
Interest rate stability has also played a role. The tightening cycle led by the Reserve Bank of Australia significantly reduced borrowing capacity across 2022–2023, but as rate expectations stabilise, buyers are returning to the market with renewed confidence.
House-and-Land Packages Lead the Recovery
The dominance of house-and-land searches reflects several structural trends currently shaping Australia’s property market:
- Relative affordability
Compared to established housing in capital cities, house-and-land packages in growth corridors often provide a lower entry price point. - Government incentives
First-home buyer grants and stamp duty concessions across multiple states continue to support demand for new construction. - Lifestyle migration
Population growth in outer suburban and regional markets is driving demand for larger homes with more land. - Energy efficiency and modern design
New homes offer improved energy ratings, lower maintenance costs, and contemporary layouts, making them attractive in a high-cost living environment.
These factors are particularly evident in high-growth states such as Queensland, where interstate migration remains elevated.
Policy Support Continues to Influence Demand
Demand for new housing last peaked in 2020 during the rollout of the Federal Government’s Home Builder program, which triggered a surge in building approvals and construction contracts.
Although no single program of that scale currently exists, a combination of federal and state-level incentives alongside infrastructure investment and population growth continues to underpin demand.
Australia’s ongoing housing supply shortage is also becoming a major structural driver. With national population growth accelerating due to strong overseas migration, the gap between housing supply and demand remains significant. This imbalance is expected to keep pressure on both established and new housing markets over the coming years.
Outlook: Demand Likely to Strengthen Through 2026
Looking ahead, the outlook for new housing demand appears positive, provided construction costs remain stable, and labour availability continues to improve.
Key factors expected to support the sector include:
• Strong population growth
• Continued infrastructure investment in growth corridors
• Gradual improvement in building capacity
• Ongoing government incentives for first-home buyers
While affordability challenges remain, the moderation in construction cost growth is a crucial turning point for the industry.
As Flaherty explains, greater certainty is now bringing buyers back into the market.
“Greater predictability around construction pricing is encouraging more buyers to explore new builds again.”
With supply still constrained and population growth accelerating, Australia’s new housing sector may be entering the early stages of its next demand cycle.
