Housing approvals continue to fall, leaving Australia's housing recovery stuck in the slow lane, with little sign the shortage is easing anytime soon.
In August, total dwelling approvals declined down 6.1%, on a seasonally-adjusted basis, to 16,953 total dwellings, according to the latest figures from the Australian Bureau of Statistics (ABS). The declines come on top of a 3.6% drop in July.
"Australia is sleepwalking into a severe building and construction downturn at precisely the time we need to be building more," said Denita Wawn, chief executive officer of industry body Master Builders Australia.
The August figures come as Australia continues to grapple with a chronic housing shortage. In 2023, Prime Minister Anthony Albanese pledged to deliver 1.2 million new homes by 2029 under the National Housing Accord. In order to achieve that, roughly 240,000 homes would need to be built each year.
On a rolling annual basis, approvals reached 208,181 in the year ending in August. That's a 9% increase, but still shy of the 240,000 needed annually to meet the government's goals.
"It's good that approvals have picked up. It is in a better position than it was a couple of years ago in terms of the number of building approvals being done," Harry Ottley, an economist at Commonwealth Bank of Australia (CBA), told Australian Broker. "If you look at the amount approved on a rolling annual basis, it troughed at around 165,000, and now we're up to around 210,000, which is a good improvement. But it's still below those targets set by the federal government.
"It's pretty obvious now that they won't meet the target," the economist added. "But I think the target was there as a bit of an aspirational one."
In the most recent data, private sector houses were up 3.7% to 10,885, while private sector dwellings, excluding houses — such as units and apartments — were down 21.2% to 5,674. Meanwhile, the value of residential buildings declined 0.6% to $11.30 billion, while the value of non-residential buildings was down 44.8% to $5.53 billion.
By state, approvals were a mix. Total dwelling approvals fell in Queensland, New South Wales and Tasmania, down -22.5%, -17.3% and -1.5%, respectively. Meanwhile, total approvals ticked upwards in South Australia, Victoria and Western Australia, up 24%, 8.9% and 3.2%, respectively.
Approvals for private sector homes increased across five states: South Australia (27.7%), Western Australia (8.6%), Queensland (6.5%), and Victoria (0.5%). NSW bucked the trend, reporting a -4.5% decline in private sector home approvals.
While approvals data can be volatile, particularly when large apartment developments can cause sharp fluctuations from month to month, Hobart-based economist Saul Eslake said: "we've got a problem in New South Wales."
Eslake pointed to the difference between the two states. NSW recorded 34,500 approvals since the start of the year, compared with 38,600 in Victoria, despite NSW having a population more than 21% larger. As of March 2026, NSW had roughly 8.67 million people, compared with 7.15 million in Victoria, according to ABS data.
"New South Wales numbers have been wibbly-wobbly for a long time," Eslake said. "The fact that Victoria is consistently approving and completing more dwellings than New South Wales, even though New South Wales' population is almost a quarter bigger than Victoria's, is a problem."
The latest figures underscore the scale of Australia's housing challenge. Building approvals are just the first step in the construction process, and not every approved dwelling ultimately gets built. As a result, the most recent approval numbers are merely an estimate to the number of new homes that will eventually be delivered.
According to the government's National Housing Supply and Affordability Council (NHSAC), roughly 175,000 dwellings reach completion each year.
"The gap between approvals and completions has opened quite wide," Eslake said.
"And given the sort of headwinds facing the sector at the moment, with interest rates moving up again and broader headwinds from the housing market downturn, etc., we're probably close to a bit of a turning point with approvals," Ottley added. "They'll probably start coming down soon.
"The construction sector, broadly, is very receptive or responsive to interest rate changes," he explained. "It's generally considered the most responsive part of the economy when monetary policy is moving around. And so obviously, with rates coming down last year, that started to stimulate some activity in the sector. And then, now that rates are moving up again, you'd expect that the approvals to start coming down again. And, generally speaking, when housing prices are also coming down, that impacts on dwelling investment and building approvals as well, because they have a relationship as well. It is more difficult to get projects off the ground if prices are coming down.
"So all of those things together, along with obviously higher inflation and the impact from the conflict in the Middle East, there are multiple headwinds that are expected to slow the amount of housing being approved and delivered," Ottley continued. "And as a result, the housing shortage will probably continue."
Wawn added: "The rate increase will prevent developers and builders from proceeding with some of the projects they need to progress. Others may still go ahead, but on a reduced scale. Combined with the acceleration of building materials prices and continued labour shortages, the cost of creating new homes far exceeds their likely selling price in many situations. This means they just won’t end up getting built."
