Australia's housing approvals pipeline sent mixed signals in May, and for brokers advising both first-home buyers and property investors, the shortfall against official targets matters as much as the monthly headline.
Westpac Economics described the results as "detached dwellings remain resilient," even as the broader approvals pace continues to normalise from the elevated levels reached in February.
Detached house approvals were the standout, according to the latest Australian Bureau of Statistics (ABS) figures, climbing 2.8% to 10,537 — the fourth straight month above 10,000 and the strongest result in almost five years, since September 2021.
On an annual basis, detached approvals are now running 13.2%yr higher, the strongest annual pace since September 2024. Westpac economist Luka Belobrajdic noted in the bulletin that this suggests detached housing approvals have "remained relatively resilient despite higher interest rates."
ABS head of construction statistics Daniel Rossi said "private sector house approvals rose 2.8%, to the highest level since September 2021," adding this was the fourth consecutive month with over 10,000 private sector houses approved.
Total dwelling numbers told a weaker story, falling 1.1% to 17,019 — the third consecutive monthly decline — as approvals for units, townhouses, and other medium-density stock dropped a steep 10.4% to 6,034.
Westpac's analysis attributed the unit slump largely to high-rise projects, which it estimated fell 35%mth, while low-and-mid-rise approvals declined a more modest 6.9%mth. The annual pace for units has now moved into outright contraction, down 8.6%yr and sitting below the average level recorded across 2025 — a reversal from the surge recorded in February.
Regionally, the picture was uneven: South Australia and NSW recorded growth in private dwelling approvals, while Western Australia and Victoria posted modest declines, and Queensland recorded the weakest outcome of any state, with approvals falling 14.2% month-on-month as both houses and units retreated.
In value terms, residential building approvals fell 5.7% for the month, but a sharp 41% rise in non-residential approvals — led by data centre-related projects — pushed the total value of building approvals up 14% overall.
Zooming out to the national picture, Australia is on track to build roughly 204,000 homes in the year to 31 May, well below the government's National Housing Accord target of 240,000 homes a year — part of a broader goal of 1.2 million new homes nationally by June 2029.
AMP chief economist Shane Oliver said the shortfall is likely to persist, warning "once allowance is made for demolitions and failures to start and complete home projects, home building is still likely to run well below the government's Housing Accord target to build 240,000 a year," news.com.au reported.
Oliver added that "the rate hikes this year are also likely to drive some softening in approvals going forward and there are already some signs that unit approvals may have peaked."
Westpac's own outlook echoed this caution, flagging that further softening in approvals appears likely amid a higher-rate environment and elevated construction costs, with tax changes adding further uncertainty.
NSW illustrates the strain most starkly. Despite a 2.2% monthly uplift in its own figures, Property Council NSW executive director Katie Stevenson said the state remains well short of trajectory.
"NSW is tracking well below what's needed to meet its 377,000 new homes target by July 2029, and the gap is widening," Stevenson said.
This aligns with Westpac's own state-level data, which recorded NSW as one of only two states — alongside South Australia — to post growth in private dwelling approvals in May.
That state target sits a month behind the Accord's national deadline — and on Stevenson's own account, NSW is moving further from it rather than closer.
Master Builders Australia CEO Denita Wawn struck a similar note nationally, arguing that "incremental change will not deliver the National Housing Accord's target of 1.2 million new homes. We need bold, coordinated reform to unlock supply at scale."
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