Sales rise despite market headwinds
New home demand remained resilient in May despite a further 25 basis point increase in interest rates, marking the third rise of 2026. Gross sales across metropolitan and regional growth corridors increased by 15.5% to 1,146 lots.

However, the uplift was likely influenced by May containing five trading weekends, along with seasonal factors that suppressed activity in the previous month. While property markets also contended with negative sentiment following taxation changes affecting property investment in FY26/27 Federal Budget, the impact was largely confined to established dwellings, with incentives for investment in new dwellings remaining unchanged.

Share of sales jumps in the Western corridor, declines in the South East.
The Northern corridor held its position as the market’s most active, accounting for 27% of lot sales on the back of a 17% monthly lift. The Western corridor was the standout performer for the month, jumping 40% from a long term low* to reclaim a 26% share of total sales. The South East corridor bucked the trend, recording a sales decline that pulled its share back to 20%.

Regional corridors were more subdued, with proportions holding steady month on month. Geelong remained the strongest at 12% of total sales, ahead of Ballarat at 6%.

*Outside of the December-January period.

Median price edges higher in Melbourne, contracts in Geelong.
Rebates and incentives continue to support pricing across the new home market, helping offset the reduction in purchaser borrowing capacity following three interest rate rises this year.

Melbourne’s median lot price increased 1% in May to $402,000, while the median lot size remained stable at 350sqm. Median lot sizes in Geelong continued to expand, growing by 4% to its largest size in over two years at 444sqm. Although, this has not influenced lot prices, with the median contracting by 1.2% to $405,000.

Build costs rise as buyer profile shifts.
The cost of building a new detached house in Victoria rose 12% over 2024/25, lifting the average to $485,292. Part of that increase is attributed to a 3% expansion in average floor area to 27.2sqs, a long term high.

Affordability challenges have led to more nonfirst home buyers among total owner occupier purchasers. RPM Buyer Surveys show that non first home buyers made up 51% of owner occupier purchasers in 2024/25, up from 41% over the prior decade. Loan commitment data also shows that annual growth in new commitments to non first home buyers ran at 5.5%, ahead of the 4.6% recorded for first home buyers.