Building approvals have dropped back across Australia following a surge in apartment approval activity that occurred earlier in the year in January and February.

But approval numbers remain above those seen during the recent trough in activity that occurred during 2023 and early 2024.

(above image source: Google Maps)

And commentators remain upbeat about the homebuilding sector’s outlook.

Released on Friday, the latest data from the Australian Bureau of Statistics indicates that the seasonally adjusted number of dwellings that were approved for construction contracted by 5.7 percent in April to come in at 14,633.

The decline was driven by a 19 percent fall in the statistically volatile multi-residential building sector (units, townhouses, apartments etc.).

That decline followed an earlier contraction in March, which in turn followed a surge in mutli-unit approval activity in Victoria and NSW throughout January and February.

(It is worth noting that monthly approval data in the multi-unit sector is typically volatile as the approval of one or more large-scale apartment complexes can result in a surge in monthly numbers.)

More encouragingly, approvals rose by 3.1 percent in the more statistically stable detached house sector.

The latest data comes as Australia is expecting an upturn in residential building activity to strengthen from the middle of this year onward.

This is likely to occur as approval numbers have trended higher since the middle of last year. These higher approval numbers are likely to flow through into greater numbers of project commencements and higher levels of building activity.

In its recent forecast, the Australian Construction Industry Forum said that it expected the dollar value of work done in residential construction throughout Australia to increase by around 3 percent in each of 2025/26 and 2026/27 before accelerating further from 2027/28 onward.

The recovery will be supported by interest rate reductions as well as ongoing moderation in cost escalation and labour pressures, ACIF said.

However, the data also highlights challenges in meeting the national housing target of delivering 1.2 million new homes over the five years from 1 July 2024 under the National Housing Accord.

To achieve this target, the nation would need to build an average of 20,000 new homes each month.

With current approvals running at less than 15,000 per month, the nation appears to be unlikely to meet this target.

In terms of states, much of the recovery in approvals over the past nine months has been centred around Western Australia and South Australia (see chart).

Meanwhile, Queensland approvals have also lifted slightly.

However, the market remains challenged in New South Wales (see chart), which as the nation’s most expensive market has seen the most significant impact of any state from higher interest rates and construction costs over recent years.

Speaking of the overall situation, Ivan Colhoun, Chief Economist at CreditorWatch, adopted a broadly optimistic tone.

Colhoun said that the April apartment approval drop may in part reflect delays in processing and paperwork as a result of an unusual pattern of public holidays.

This may have seen a significant number of council staff take an entire week off during the fourth week of the month as a result of the Easter (April 18-21) and Anzac Day holidays.

“The results solidify the flat trend for private sector houses (it was looking like these approvals were unusually in slight trend decline) and in my opinion only temporarily interrupts the emerging uptrend in apartment approvals,” Colhoun said.

“It’s possible that less approvals were approved by and/or submitted to councils in April due to the unusual combination of holidays.

“The further interest rate reduction by the RBA in mid-May should see further support for residential building in the months ahead, which will be welcome news for builders.”

Enjoying Sourceable articles? Subscribe for Free and receive daily updates of all articles which are published on our site

Want to grow your sales, reach more new clients and expand your client base across Australia’s design and construction sector?

Advertise on Sourceable and have your business seen by the thousands of architects, engineers, builders/construction contractors, subcontractors/trade contractors, property developers and building industry suppliers who read our stories across the civil, commercial and residential construction sector