The residential construction pipeline continues to contract, with new home building approvals falling again in October and deepening concerns about the nation’s ability to meet long-term housing needs.
Australian Bureau of Statistics data shows total approvals across all dwellings are now 1.8% lower than the same time last year, while monthly approvals fell sharply by 6.4%. The downturn is particularly pronounced in higher-density projects—an essential component of national housing supply.
Master Builders Australia chief economist Shane Garrett reports that multi-unit approvals dropped a substantial 12.1% in October. This decline compounds a multi-year trend of reduced apartment and townhouse construction, driven by higher financing costs, elevated building material prices and persistent labour shortages. Developers facing escalating project budgets are struggling to make financial models viable, resulting in delays, redesigns or complete cancellations.
Despite the challenges in the medium-to-high density sector, detached housing approvals remain slightly higher than at the same point last year. However, the uplift is modest and insufficient to offset the broader supply imbalance. Across the 12 months to October 2025, only 192,000 new homes were approved—far below the estimated number required annually to improve affordability and keep pace with population growth. Garrett warns that Australia is “well off what it needs to produce,” noting that failing to boost supply will worsen the already severe affordability crisis.
Housing affordability in 2025 has deteriorated to its weakest level on record. High interest rates throughout 2023 and 2024, rising construction costs and a shortage of available land have eroded the capacity of buyers and developers alike. While the RBA’s recent rate cuts may offer some relief, they have not yet translated into the confidence required to kick-start major building projects. Many developers are still encountering tight credit conditions, and banks remain cautious about financing large-scale residential ventures.
Interestingly, while new builds are slowing, homeowners are shifting their attention to improving their existing dwellings. Major renovation approvals have increased by 3.5%, suggesting households are opting to upgrade instead of move, particularly as transaction costs and limited stock constrain their choices. This trend is further supported by a growing appetite for energy-efficiency upgrades, extensions and structural improvements that better support multi-generational living.
Master Builders Australia CEO Denita Wawn says the industry is facing one of its toughest operational environments in decades. She warns that without targeted reforms to reduce pressure on builders and developers, more projects will stall before they begin. Wawn highlights several factors contributing to the strain: slow planning approval processes, excessive regulatory burdens, increased insurance costs and ongoing construction sector insolvencies. These pressures collectively undermine industry confidence and discourage investment in new housing supply.
The broader implications of declining approvals are substantial. With migration levels remaining high, rental vacancies at historic lows and household formation increasing, the demand for housing continues to outpace supply. This imbalance contributes to rising rents, intensifies competition among buyers and pushes many Australians into long-term insecurity. Industry groups are calling for coordinated national action, including planning reform, incentive programs for build-to-rent developments, and improved workforce training to address labour shortages.
Public and private collaboration is seen as essential to reversing the downward trend. Some states have begun experimenting with fast-tracked approvals and infrastructure incentives designed to unlock new development zones, but early results are mixed. Without sustained commitment, industry analysts warn that Australia risks entrenching a structural housing shortage that could take decades to correct.
As the year draws to a close, policymakers face mounting pressure to implement solutions that will increase housing production, reduce building costs and restore builder confidence. With approvals falling and affordability worsening, the stakes for 2026 are high.
