New home approvals rise, but not fast enough to ease housing squeeze

New data from Australia’s official statistician shows building approvals for new homes, particularly new apartment developments, jumped significantly in January 2025.

However, dwelling approvals are still way below where they need to be to have any chance of meeting the nationally-agreed target of building 1.2 million new homes in Australia by mid-2029.

Economists have also questioned the sustainability of the uptick in approvals, given January's numbers were boosted by the approval of several high-rise apartment developments in just one state, New South Wales.

The details

The Bureau of Statistics says the total number of dwellings approved in Australia in January 2025 was 16,579 in seasonally adjusted terms, a 6.3% rise on the previous month’s figures.

In value terms, total residential building rose 4.5% to $9.04 billion.

It’s the largest volume of new approvals in more than 2 years and 30% higher than the low of just 12,836 dwellings approved for construction in April 2023.

By dwelling type, the number of new freestanding houses approved by regulators rose just 1.1%, to 9,042.

The big jump came in what the ABS lists as “private sector dwellings excluding houses”;  the building category which includes apartments and townhouses.

That saw a large jump of 12.7% to 7,213 new units.

The significant improvement in the dwelling approvals figures was warmly welcomed by the Federal Treasurer Jim Chalmers.

“One of the most encouraging elements of that is we’re starting to see the private sector reclaim its rightful place as the primary driver of growth in our economy,” he told reporters.

The Property Council of Australia described the figures as “heartening”, but warned significantly more needed to be done. 

Independent housing economist Cameron Kusher says that while “dwelling approvals lifted in Jan 25 and annual approvals are now trending higher, we aren’t approving anywhere near enough dwellings to achieve the Housing Accord target.

“With lower interest rates and moderating construction costs, we will probably see approvals continue to rise, but we are likely to remain a long way from the more than 240,000 annual approvals required.”

To keep roughly on track with the Housing Accord target, roughly 20,000 new dwellings would have to be approved each month, and that’s before accounting for the traditional “drop-out” rate of about 2%, where homes are approved but don’t proceed to construction.

Westpac Economist Neha Sharma says the January result was a “surprise” and “well-above market expectations”.

However, she says the “picture is less certain beneath the surface”, commenting that approvals data in December and January “is often more volatile.”

Ms Sharma notes the big uptick in apartment approvals in the ABS data, but questions how much of this is statistical “noise”.

“On a rolling three-month average basis, private units are up 23.9% per quarter and 25.5% over the year,” she says. 

“Digging deeper, there are imbalances within this segment. 

“Firstly, high-rise approvals have driven most of the lift, with the low-mid rise segment relatively subdued. 

“Secondly, most of the high-rises have been approved for NSW, with other states seeing a tick down or flattening in recent months,” she says.

Independent economist Cameron Kusher notes that “the majority of approvals continue to be sought for apartments that are greater than 4 storeys in height.”

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He says there’s been a lot of focus by state and local governments on “delivering more missing middle housing like townhouses and lower-rise apartments, because they are more palatable in suburban areas and they are quicker to build than high rise.”

But Mr Kusher says it is “hard to imagine a significant increase in these approvals with construction costs remaining elevated and development feasibilities challenged, unless there are some significant policy changes.

“This means that more of the heavy lifting for new supply is going to have to be done by detached houses which are quicker to build and generally more desired by purchasers.”

However, Mr Kusher points out that “the cost of providing infrastructure for new greenfield housing is a challenge for governments.”

“Even if the upturn proves to be more durable,” Westpac’s Neha Sharma says approvals “are still likely to fall well short of the Housing Accord target in 2025.”

Given that Australia is already facing an existing shortfall of between 200,000 and 300,000 homes at a time of relatively high population growth, the current housing crisis doesn’t look set to ease any time soon.