Approvals hold steady, yet dwelling prices tipped to fall further

The improvement was uneven, with private sector house approvals dropping 5.3 per cent to 10,432, despite remaining 9.6 per cent higher annually.

Conversely, approvals for private-sector dwellings excluding houses climbed 16.6 per cent to 6,579, yet remain 20.5 per cent below their year-earlier level.

House approvals retreat as apartments recover

ABS head of construction statistics Daniel Rossi said the decline in private sector house approvals stood out against recent monthly results, even as the broader dwelling approvals measure rebounded.

“The September fall in private sector house approvals is the largest since August 2025,” Rossi said.

“Despite this drop, it is the ninth consecutive month where more than 10,000 private sector houses have been approved across Australia.”

In original terms, apartment approvals increased 25.6 per cent to 4,129, marginally above their 12-month average of 4,106.

Within those figures, Rossi pointed to NSW as the strongest source of September’s improvement.

“New South Wales had the biggest rise in apartment approvals in September, with 1,995 apartments approved compared to 901 in August,” Rossi said.

Townhouse approvals meanwhile increased 8.3 per cent to 2,792 after falling 19.4 per cent in August, but remained 2.5 per cent below their 12-month average of 2,864.

Earlier momentum cushions a weakening outlook

Housing Industry Association (HIA) senior economist Tom Devitt cautioned against interpreting the September result as evidence that home building had weathered higher borrowing costs, arguing that approvals were yet to reflect the effects of this year’s rate increases.

“With the RBA having delivered four rate rises this year, and the possibility of more to come, this is yet to flow through to approvals,” Devitt said.

“Past momentum in the market from early 2025 to early 2026 is likely to sustain approvals at current levels until the end of the year.”

Yet Devitt pointed to new home sales as an earlier indication that financial pressures and policy settings were weighing on purchasing decisions.

“Leading indicators of home building activity such as new home sales have already started to reflect the impact of rising interest rates, surging fuel costs and cost of living pressures, and increasing taxes and restrictions on investors,” he said.

“Nonetheless, national home building data like approvals and commencements are not likely to be greatly affected until next year.”

Master Builders Australia chief economist Shane Garrett also warned that the monthly increase offered limited reassurance about the longer-term outlook, with the association’s forecasts pointing to a weaker construction pipeline than anticipated six months earlier.

“While it is positive to see approvals move higher, builders’ forward books are becoming increasingly uncertain. Our recently released forecasts show that new home building activity will decline steadily over the coming years and will be substantially lower than anticipated just six months ago,” he said.

“What has happened in six months? A deeply flawed Federal Budget, a conflict in the Middle East and higher interest rates. This has seen a building and construction slowdown, a situation that will result in less homes, infrastructure and buildings being delivered.”

Garrett said the outlook was also being constrained by the rising cost of delivering projects.

“The cost of delivering new homes has increased dramatically, rising by more than 50 per cent since the pandemic. At the same time, the cost of building roads, bridges and non-residential projects has surged, placing further pressure on investment and project viability,” he said.

CBA deepens forecasts for the price correction

Separately, CBA’s Tuesday downgrade lifted its forecast national peak-to-trough price fall from around 9 per cent to 14 per cent, with the five-capital-city average expected to decline around 15 per cent.

CBA said its revised national forecast would put the eventual decline beyond any previously recorded in the monthly series.

“That would make the current downturn the largest decline in national dwelling prices in the history of the monthly series, which extends back around 45 years,” CBA said.

With national dwelling values already 6.7 per cent below their March peak and the combined five-capital index down 8.2 per cent, the bank said the speed of the downturn was also notable against previous housing cycles.

“This is the fastest pace of decline in at least 40 years and is already close to the 8.6 per cent peak-to-trough fall recorded in the 2017–19 downturn,” the bank said.

The downgrade was particularly pronounced in Brisbane and Perth, where CBA said prices had already fallen further than previously expected.

“Brisbane and Perth have already exceeded our previous peak-to-trough forecasts, while historical revisions have again marked down price growth in the mid-sized capitals. As a result, we expect materially deeper falls in Brisbane and Perth, with 18 per cent peak-to-trough falls in both cities,” CBA said.

“We also now expect peak-to-trough falls of around 16 per cent in Sydney and 13 per cent in Melbourne and Adelaide.”

CBA expects national prices to fall 8 per cent during the remainder of 2026 and another 3 per cent in 2027, before stabilising in the second half of next year.

[Related: Mortgage growth flatlines at Australia’s biggest banks]