New South Wales has recorded the strongest growth in higher-density housing approvals nationwide, driven by targeted housing policy reforms designed to increase the supply of affordable homes.
Over the 12 months to May, NSW approved 24,716 new apartments, townhouses, and semidetached dwellings, overtaking Victoria’s 22,904, according to new data from the Australian Bureau of Statistics.
According to Financial Review, the figures mark a significant shift, as Victoria has historically led in residential construction. Analysts attribute the boost in NSW to planning incentives, including the state’s infill affordable housing policy, which grants developers floor-space and height bonuses if 10% to 15% of a project’s floor area is dedicated to below-market-rate rentals.
“It’s really projects that can take advantage of policy changes like those height bonuses for those affordable housing additions,” Oxford Economics Australia lead economist Maree Kilroy told Financial Review. “Otherwise, in the traditional build-to-sell market, those feasibilities are still an issue.”
The renewed development activity comes as housing authorities and industry players grapple with the ambitious National Housing Accord target of 1.2 million new homes over five years. With one year nearly complete, experts say more supportive planning frameworks, lower borrowing costs, and a resilient construction sector are needed to close the gap.
“It takes roughly a year for cash rate cuts to flow through positively to house construction,” Kilroy said, adding that expected rate cuts in the coming months could bolster project feasibility into 2026.
Nationally, housing approvals rose to almost 183,000 over the past year, an 11% increase compared to the year prior. However, that number still falls short of the 300,000 annual approvals needed to ensure 240,000 home completions per year – the level required to address Australia’s chronic housing undersupply.
“Given still-strong population growth (the 15 years-plus population increased by 444,000 over the past year), the level of dwelling approvals remains low,” said NAB head of markets economics Tapas Strickland. “In this context, vacancy rates have continued to edge lower with the nationwide residential vacancy rate sitting at 1.6%.”
Victoria remained the national leader in total approvals at 55,960, followed by NSW at 46,569 and Queensland at 37,848. Despite a recent dip in apartment approvals, Kilroy said Queensland’s outlook remained positive due to generous first-home buyer incentives.
“If you combine that with the stamp duty exemption and a first home buyer grant, that’s very, very attractive for new purchases,” she said.
