The ACT has topped the Housing Industry Association's latest scorecard rising from sixth place in mid-2020.
The association releases scorecards every six months ranking states and territories on their performance based on 13 indicators for the residential building industry.
Housing Industry Australia economist Tom Devitt said it was the first time that the ACT had topped the scorecard since 2014.
"The ACT has benefited from steady population growth and a stable labour market when compared to other jurisdictions," he said.
"This has supported strong demand for new homes and renovation activity, which has been boosted by the HomeBuilder program."
"Activity in the first-home buyer sector has also grown strongly."
Victoria moved in the opposite direction, dropping from first place to sixth between mid-2020 and early-2021 due to the COVID-19 recession.
"Victoria consistently ranked in the top two spots from late 2015 to mid-2020," Mr Devitt said.
"This fall is due to a contraction in most of the thirteen indicators."
NSW fell to fifth place, the lowest scorecard ranking for the state since 2012.
Mr Devitt said Tasmania, Queensland and South Australia have kept higher rankings, in second, third and fourth places respectively.
"These states have endured the challenges of the COVID recession with greater resilience than Victoria and NSW," he said.
West Australia was ranked seventh and Northern Territory was ranked eighth.