BUILDING approvals in NSW rose 25.1 per cent — just below the national average of 27.3 per cent.
HIA senior economist Andrew Harvey, said the result provides some hope of an improved new home building outlook and shows interest rate cuts may be starting to have an impact.
"However, we need to keep in mind that the result comes off a very low base in April and is driven by the highly volatile multi-unit part of the market," he said.
"The level of approvals in the core segment of detached housing remains well below the levels recorded one year ago.
"Key factors behind the strong May result include a partial rebound in Western Australia which saw approvals up by 24.8 per cent in May after a 47.2 per cent fall in April, along with a similar rebound in South Australia.
"There is also a bring forward effect in both Victoria and NSW where buyers have rushed into the housing market to secure state government home buyer incentives."
Multi-unit approvals rose by 58.3 per cent in May 2012, up by 41.5 per cent on May 2011.
Detached housing approvals were up by nine per cent in May 2012, but down by 8.5 per cent when compared to May 2011. The May result follows a 7.6 per cent fall in total approvals in April to their lowest level since May 2009.