Building commenced on fewer homes throughout Australia in the March quarter following a spike in housing starts over the last three months of 2025, new data shows.But the trend for nation’s home building market remains broadly positive.

The Australian Bureau of Statistics has released the March quarter edition of its Building Activity report.

According to the report, the seasonally adjusted number of dwellings on which construction commenced throughout Australia dropped by 11.2 percent in the March quarter (see chart).

This follows an 8.2 percent surge which occurred in the December quarter on account of a spike in commencements on large-scale apartment projects in New South Wales.

Despite the quarterly decline, commencement numbers remain healthy compared with those which have been recorded over the past three years (see chart).

Leading the quarterly decline was a 20.2 percent fall in commencements for the statistically volatile multi-unit sector (townhouses, apartments etc.)

This reversed a surge in this sector that occurred in the December quarter.

However, commencements in the more statistically stable detached house sector also contracted by 3.5 percent.

In terms of states, the largest decline was observed in New South Wales following the aforementioned spike which occurred in that state in the December quarter.

Commencement numbers also dipped in Queensland, Western Australia and South Australia but remain at healthy levels in these states.

The data also suggests that:

• The number of dwellings under construction (243,864) has risen to its highest level on record. This reflects a healthy pipeline of work that has grown since the recovery in new home building work began.
• The seasonally adjusted number of dwellings that were completed during the March quarter contracted by 0.4 percent to come in at 43,816.

(In its initial phase, the recovery in new home building activity was concentrated in the detached house segment of the market. in the second half of 2023 and throughout 2024. In 2025, a greater number of multi-residential projects came through. The decline in multi-unit starts in the March quarter most likely represents a reversal of the spike which occurred in the December quarter.)

The latest data comes as Australia has been experiencing a recovery in new home building activity which has taken hold since interest rates peaked in the middle to latter part of 2023.

Thus far, the recovery has been concentrated in Queensland, South Australia and Western Australia (see chart).

By contrast, activity in Victoria remains flat whilst that in New South Wales has been relatively subdued.

In its early stages, the recovery focused around detached house building.

However, commencements in the multi-unit sector also strengthened across 2025.

(Thus far, the recovery in new home building has been mostly concentrated in Queensland, South Australia and Western Australia. In Victoria, new housing commencements remain flat. Commencement numbers are also subdued in New South Wales.)

The data also comes as previous expectations for stronger home building activity levels across 2026 have been reined in on account of three interest rate rises in February, March and May.

Previously, Housing Industry Association (HIA) had expected a strong acceleration in home building activity across 2026. This would build upon momentum that was seen in 2025.

Over recent months, however, HIA has tempered its expectations for the current year and has pushed out its expectations for a further strengthening in the recovery until 2027 and 2028.

This view is supported by approval data, which shows that the number of dwellings which have been approved for construction has held steady across the first five months of the year but is no longer accelerating as it did throughout 2025.

(Thanks to a good number of new housing projects which have come through over recent quarters, Australia now has more homes under construction than ever before. The pipeline is particularly strong in Queensland, Western Australia and South Australia.)

Finally, the data further underscores the degree of challenge involved in achieving the national housing target of delivering 1.2 million new homes over the five years to June 2029 as established under the National Housing Accord.

To meet this target, the nation would need to deliver an average of 60,000 homes per quarter across the Accord period.

With seasonally adjusted commencements of 48,012 and completions of 43,018 in the latest quarter, however, the nation remains well short of what is needed to reach this target.

(Housing starts remain well below levels which are needed to achieve the national housing target of delivering 1.2 million new homes over the five years to June 30, 2029)

HIA Senior Economist Tom Devitt took an optimistic view of the latest data.

He pointed out that the annual number of commencements over the twelve months to March (197,340) was 12 percent higher compared with the 176,230 starts that were recorded a year earlier in the twelve months to March 2025.

Speaking of the March quarter results, Devitt noted that these predated the effect of the three most recent interest rate rises, global uncertainly and the announcement of tax changes in the Federal Budget.

Rather, he said that the result most likely simply represented regular quarterly volatility.

In terms of prospects for 2026, Devitt says that a robust pipeline of work in states such as Queensland, South Australia, Western Australia and the Northern Territory will be sufficient to keep builders going through the volatility of the current year in these states.

Elsewhere, he acknowledges that markets such as New South Wales, Victoria and the ACT are more vulnerable to volatility on account of their less extensive pipeline of projects.

However, he expects that strong fundamentals should support healthy levels of activity in these markets so long as recent disruptions are short-lived.

However, Devitt cautions that the number of starts remains well below that which is needed in order to address national housing shortages or meet the national housing target.

In fact, he points out that to reach the target, Australia now needs to deliver an average of 66,777 new homes per quarter over the remainder of the Accord period.

This is the case as the nation has thus far fallen short of the 60,000 homes which are needed on average per quarter in order across the five-year Accord period.

“Home building had good momentum heading into 2026, picking up on the back of declining interest rates, low unemployment and existing shortages of housing across the country,” Devitt said.

“Jurisdictions like Western Australia, Queensland, South Australia and the Northern Territory have been leading the national improvement in home building volumes and have a significant pipeline of new sales ready to commence. This will help smooth out on-the-ground activity through this year’s volatility.

“The southeastern state and territory recoveries have been delayed and are more vulnerable but as long as recent disruptions are short-lived, strong population growth and tight labour market fundamentals should support activity here too.

“This trajectory will not be sufficient to meet the Housing Accord Target, and Australia’s housing needs are even greater than this.

“Australia needs to meet housing demand not only from population growth but also shrinking household sizes, increasing knockdown-rebuild activity, ageing population and increasing dependence on overseas migrants who tend to live in smaller households.

“HIA estimates 250,000 home builds each year are required on a sustained basis to meet these demands and start addressing the pre-existing shortage of housing across the country.

“Achieving this depends on governments reducing the cost of delivering new homes to market.

“This includes reducing taxes on housing, not increasing them. Housing is one of the most heavily taxed items in our economy along with the ‘sin taxes’ of alcohol and tobacco.”

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