New home building confidence is sliding fast. Contract cancellations jumped nearly 50 per cent in a single month, and builders are bracing for more pain ahead.

The Housing Industry Association’s June New Home Sales report found that sales contracts for new detached homes fell 4.6 per cent in June, following a sharp fall in May that pushed monthly volumes to their second lowest level since February 2025. More alarming was the cancellation rate, which surged from 9.8 per cent to 14.8 per cent of monthly sales. The HIA says that rate has historically stayed below 10 per cent, with the only exceptions being the 2018/19 credit squeeze and the early months of COVID.

HIA chief economist Tim Reardon says households are getting cold feet as borrowing costs bite. “The recent decline in sales reflects households becoming more cautious in response to higher borrowing costs and increased uncertainty, rather than a reduction in Australia’s need for homes,” Reardon said. Three interest rate rises this year have squeezed conditional finance approvals, with many lenders pulling pre-approved lending as borrowing capacity shrinks.

Things could get worse once federal budget changes flow through. Restrictions on negative gearing, adjustments to capital gains tax, and a ban on self-managed superannuation funds entering new limited recourse borrowing arrangements to buy residential property were all announced in recent months. Property investors currently finance roughly two in five new home builds, and the HIA says these changes will hit that funding stream hard.

On the SMSF rule alone, builders surveyed expect around 2,415 existing contracts financed through those arrangements to be cancelled once legislation takes effect. The HIA estimates that change could cut detached housing commencements by 3.5 to 5 per cent, with an even larger impact on apartments and townhouses.

More than 80 per cent of builders surveyed expect new dwelling commencements to fall by at least 5 per cent as a result of the policy changes. Half of those expect a drop of more than 10 per cent. The HIA says June’s cancellation spike is almost certainly interest-rate driven, with budget decisions yet to show up in the numbers.

For tradies on the tools, the pipeline risk is real. Fewer signed contracts and rising cancellations mean less site work in the 6 to 18 months ahead, particularly in detached housing and apartments where investor-funded projects tend to concentrate. Population growth, low unemployment, and a persistent housing shortage remain supportive factors, but whether this slowdown is a brief pause or something broader will become clear over the next few months.

Frequently asked questions

Why are new home building contracts being cancelled at such a high rate?

The HIA attributes the June spike primarily to higher borrowing costs, with three interest rate rises this year squeezing conditional finance approvals. Many lenders have pulled pre-approved lending as borrowing capacity shrinks, causing households to walk away from contracts.

How will the federal budget changes affect new home construction?

The HIA says restrictions on negative gearing, capital gains tax adjustments, and a ban on SMSFs entering new limited recourse borrowing arrangements to buy residential property will hit investor funding of new builds. More than 80 per cent of builders surveyed expect commencements to fall by at least 5 per cent, and half expect a drop exceeding 10 per cent.

What does the SMSF lending ban mean for builders specifically?

Builders surveyed by the HIA expect around 2,415 existing contracts financed through SMSF arrangements to be cancelled once the legislation takes effect. The HIA estimates this single change could cut detached housing commencements by 3.5 to 5 per cent, with a larger impact on apartments and townhouses.

Sourced from Housing Industry Association, Sourceable. Original article.