Declining approvals do little to rekindle hopes of housing crisis reversal

The latest building approval figures can stake a claim to being the first piece of bad news to cross the reinstalled prime minister’s desk after Anthony Albanese’s comfortable election victory.

To meet National Housing Accord targets the country should be approving and completing roughly 20,000 homes per month to build 1.2 million new homes over five years but instead March approvals went backwards across all dwelling types.

Data released Tuesday (6 May) by the Australian Bureau of Statistics (ABS) revealed that in March private dwellings excluding houses were down 15.1 per cent, and private sector houses came in 4.5 per cent lower.

The figures highlight the challenge facing the federal government as it touts addressing the housing crisis as one of its top priorities.

Victoria and Queensland were the main drivers of the fall, dropping 10.0 per cent and 8.0 per cent, respectively. Western Australia bucked the trend, rebounding 10 per cent off a soft February result.

Across Australia, the number of private sector house approvals fell 4.5 per cent (to 8,804 dwellings), following a 1.1 per cent rise in February. The result is 3.3 per cent lower than March 2024.

Maree Kilroy, Lead Economist for Oxford Economics Australia, said the fall in house approvals continues a downwards trend that has been unfolding since late 2024.

“The slowdown mirrors feedback of weaker land sales in key greenfield markets.

“Following a strong start to the year, private attached dwellings normalised in March, down 15.1 per cent to 6,104.

“Melbourne apartment approvals dropped considerably, while Queensland and New South Wales showed some improvement off softer February figures.”

While the March figure will attract the attention of those charged with sorting out the country’s housing supply mess, the number of new homes approved over the first three months of 2025 is still up 20.8 per cent on the same period last year.

Housing Industry Association (HIA) Senior Economist Tom Devitt said much of the improvement over the last year has come from multi-unit approvals, which were up by 52.6 per cent on the very low levels a year earlier, while detached approvals are up by a more modest 4.2 per cent.

As it stands, the government is set to fall almost 20 per cent short of its own target, he said.

“Despite the improving numbers over the last year, building approvals are still running at around 180,000 per year, well short of what is required to commence 1.2 million homes over five years.

“It is also important to remember that many recent apartment approvals are likely to be ‘faux’ approvals.

“A change in market conditions have meant that a number of apartment projects that were already approved for construction will need to seek re-approval and comply with the new construction code, and the higher cost of construction will further impair sales volumes.

“There are a very large number of apartments approved for construction across capital cities, but only a small number of these will commence construction.”

Rate cut ammunition for RBA

In separate news from the ABS also released Tuesday, household spending fell 0.3 per cent in March.

With consumers showing signs of putting the wallets and purses away, the Reserve Bank of Australia (RBA) will have further ammunition to cut interest rates at its 20 May meeting.

The RBA is also likely to factor in the latest data highlighting the resilience of borrowers.

According to SQM Research’s April 2025 report, also released Tuesday, the number of residential properties listed under distressed conditions in Australia decreased to 4,796, reflecting a 3.5 per cent fall from the previous month.

Distressed listings remain lower by 8.8 per cent year-on-year, reflecting a benign distressed properties environment at the national level.

The same report also showed that total nationwide residential property listings decreased by 3.6 per cent over the month of April 2025, falling to 242,435 listed properties.  

Listings declined across all major cities. Sydney and Canberra recorded the largest monthly decrease at 7 per cent.