New home sales recovered from lacklustre results over the first four months of 2019 in May, hitting their highest monthly level in over a year.
The federal elections affected the market confidence and discussions on proposed changes in capital gains tax strengthened the uncertainty in the first part of the year, according to HIA's Chief Economist Tim Reardon.
"This month's result confirms our expectation that the decline in building activity will start to level off in the second half of 2019 and stabilise at a level below the highs achieved back in 2017," he said.
The HIA New Home Sales report showed that Australia's largest states experienced the improvement in home sales. The results implied a broad-based increase in housing market sentiment around the country.
New home sales jumped in all five major states, namely New South Wales (+54.2%), Western Australia (34%), Queensland (+26%), Victoria (+25.3%), and South Australia (+0.9%).
Reardon said that an easing of the credit squeeze, lower interest rates, and an expectation that the Australian Prudential Regulation Authority will implement reforms to mortgage lending guidelines could help lift the sales activity.
"The slow start to 2019 has seen intense competition amongst home builders,” he said. “The lift in sales shows that more homebuyers are seeing opportunities in this competitive trading environment. Income tax cuts, solid population growth and accelerating wage growth are necessary to ensure that the market does not decline further."
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