The number of new detached homes that were approved for construction throughout Australia reached its highest level in four years in May, new data shows.

But overall dwelling approval numbers eased back on account of a decline in the multi-residential sector.

The latest monthly data from the Australian Bureau of Statistics reveals that the seasonally adjusted number of dwellings that were approved for construction throughout the nation eased back by 1.1 percent in May to come in at 17,019.

At this level, approvals remain at reasonably healthy levels (see chart). Over the three months to May, seasonally adjusted approvals remained 8.5 percent higher compared with the same period last year.

The monthly decline was driven by a 10.4 percent contraction in the statistically volatile multi-residential sector.

Approvals in the more stable detached house sector increased by 2.8 percent to reach their highest level since September 2021 (see chart).

The latest data comes as real-estate information service provider Cotality has reported that national dwelling prices dropped by 0.4 percent in June – the biggest monthly decline since December 2022.

This was led by price falls in Sydney and Melbourne of 1.2 percent and 1.0 percent respectively.

Over the past year, however, dwelling prices have risen by 7.4 percent on account of strong gains in Perth, Brisbane and Adelaide.

The monthly contraction in house prices follows the May budget changes to negative gearing and capital gains tax along with the most recent 0.25 percent increase in official interest rates on May 6 (at its latest meeting on June 18, the RBA left official interest rates on hold).

The data comes as Australia has experienced a recovery in new home construction over the past two years.

This has been supported by low unemployment and population growth.

Thus far, most of the recovery has been concentrated in Queensland, Western Australia and South Australia.

In its early stages, the recovery was focused on detached housing (see chart).

It strengthened further last year last year as ground broke on a growing number of multi-residential projects.

Thus far in 2026, multi-residential approvals have begun to trend lower but momentum in detached house approvals has continued to grow (see charts).

Housing Industry Association Chief Economist Tim Reardon welcomed the latest data – pointing out that approval numbers remain high notwithstanding the latest monthly decline.

He acknowledges that housing market sentiment has been impacted by the Iran war, the May interest rate rise and the budget tax changes.

However, Reardon expects the market to recover once the ‘noise’ from the budget and interest rate increases clears and low unemployment supports a return of confidence.

He says that an increasing pipeline of housing projects which are not yet commenced will support builders to remain busy despite the short-term loss in confidence.

“The data continues to reflect the good momentum in Australian home building heading into 2026, supported by elevated population growth and low unemployment,” Reardon said.

 

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