Australia has a housing crisis. Every government report, every industry body, every economist with a spreadsheet agrees on this. The Federal Government's answer was the National Housing Accord — a commitment to deliver 1.2 million new homes over five years from 2024. That is 240,000 homes per year: an ambitious but theoretically achievable target given the scale of the challenge.
The latest ABS building approvals data makes it clear that we are not on track. Not even close. Multi-unit dwelling approvals — apartments, townhouses, and attached dwellings — fell 44% in late 2025, reaching their lowest level since the depths of the COVID-19 lockdowns in 2020. This is not a rounding error. It is a structural collapse in the pipeline that was supposed to provide the bulk of the new supply Australia desperately needs.
What the ABS Data Actually Shows
The Australian Bureau of Statistics releases monthly building approvals data that tracks the number of new dwellings approved by local councils — a leading indicator of construction activity six to twelve months ahead. When approvals fall, completions follow. The multi-unit approvals collapse in late 2025 means the apartment pipeline for 2026 and into 2027 is materially thinner than it was even twelve months ago.
To put the 44% decline in context: multi-unit dwellings — apartments and higher-density townhouses — were supposed to carry the majority of the Accord's delivery. Australia's planning systems and land economics make it very difficult to deliver large volumes of detached housing near employment centres. Density, not sprawl, was the intended mechanism for meeting the target. That mechanism is now operating at COVID-era levels.
Multi-unit dwelling approvals — indexed to 2021 peak
Approximate trend based on ABS data
Why Developers Have Stopped Building
The collapse in approvals is not a mystery. Apartment development in Australia is an economics exercise, and the economics have become deeply unfavourable over the past three years. Three overlapping forces are responsible:
Construction costs have outpaced end values. As covered in our earlier analysis of global supply chain pressures, construction costs in Australia have risen approximately 22% since 2023. When the cost to build a 60-square-metre apartment exceeds the price a buyer will pay for it — particularly in markets outside Sydney and Melbourne — projects simply do not proceed. Developers abandon sites, return equity to investors, and wait. Many have been waiting for two years now.
Development finance has tightened severely. Construction loans — the debt developers use to fund projects from approval to completion — carry interest rates that have risen in lockstep with the cash rate. Pre-sales requirements (the number of apartments a developer must sell before a lender will fund construction) have also increased as lenders price in settlement risk. In many markets, it is now almost impossible to achieve the required pre-sales at prices that justify the build cost.
Builder insolvencies have destroyed capacity. The wave of construction company failures between 2022 and 2025 — driven by fixed-price contracts written before the cost surge — has materially reduced the industry's ability to execute even viable projects. Trades are booked out. Project managers have moved into competing sectors. The institutional knowledge that left those failed firms does not return quickly.
"The approvals pipeline is the most reliable forward indicator of housing supply. When it collapses to COVID lows while population is growing at record pace, the supply gap does not close. It widens."
— RentInvest Research TeamThe National Housing Accord: A Target Without a Mechanism
The Federal Government's 1.2 million homes target was always ambitious. It required not just planning reform and land release, but the active cooperation of a construction industry capable of delivering at pace. In current market conditions, that industry does not exist at the required scale.
Industry bodies including the Housing Industry Association and the Property Council of Australia have both issued revised forecasts placing actual completions materially below the Accord target for every year of the five-year period. The cumulative shortfall — homes that were promised but will not be built — now runs into the hundreds of thousands.
What This Means for the Market
Supply and demand is not complicated. When the number of dwellings being added to the housing stock falls far below the number of people needing to be housed, prices and rents rise. Australia has been living this reality for three years. The approvals data tells us it will continue for at least another three to five.
The lag between an approval and a completed dwelling is typically twelve to twenty-four months for apartments. The low approvals being recorded now will translate into low completions in 2027 and 2028. Even if the economics improve dramatically today and approvals surge tomorrow, the pipeline is already set for the next two years. There is no short-term fix.
- Vacancy rates — already at record lows — face continued downward pressure as completions lag population growth
- Rental growth will remain structurally elevated in markets where new supply is most constrained
- Existing dwellings in well-located, undersupplied markets will face less competition from new supply than at any point in the past decade
- Land values in growth corridors will continue to be supported by the cost of replacement exceeding existing sale prices
The apartment approval collapse is the clearest structural signal yet that Australia's housing shortage is deepening, not resolving. For a rentvestor holding an investment property in a market where new supply is constrained, the fundamental investment case strengthens with each monthly ABS release. Demand — driven by record migration — is not going away. Supply — confirmed by the approvals data — is not coming to the rescue. That gap is the foundation of the investment thesis.
Will Anything Change?
State and federal governments are not sitting entirely still. Planning reforms in New South Wales, Queensland, and Western Australia have aimed to reduce approval timeframes and unlock medium-density development near transport corridors. The federal government's Help to Buy scheme and Build to Rent incentives have sought to stimulate different parts of the supply chain.
But planning reform has a long lead time before it shows up in completed dwellings. And no government policy addresses the fundamental economics problem: until construction costs fall, or apartment prices rise, or interest rates drop far enough to restore development feasibility, private developers will not build at scale. Policy can enable supply. It cannot mandate it.
A meaningful reversal in the approvals trend requires at least two of the following: a material reduction in the cash rate (restoring development finance viability), a significant fall in construction input costs (restoring project feasibility), or a sustained rise in off-the-plan apartment prices (improving developer margins). None of these appear imminent in combination.
The most credible near-term catalyst is RBA rate cuts. Even a 75–100 basis point reduction in the cash rate would meaningfully improve both development finance costs and buyer confidence for off-the-plan purchases. Watch the RBA, not the planning minister.
The supply shortage benefits investors in markets with genuine underlying demand — where population is growing, employment is strong, and new supply is constrained by economics or planning. In markets where prices have already fully priced in a supply-constrained future, or where demand fundamentals are weak, the housing shortage provides less investment protection. The data tells you where to look. Do not substitute macro tailwinds for property-level analysis.
Track the supply data