Detached house approvals on the rise as multi-unit figures dip
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Photo by Vladimir Srajber
In a promising development for the Australian housing market, building approvals for new detached houses reached a new high in May 2026, marking a 3.0 per cent increase to 10,690 units. This represents the strongest month for detached house approvals since September 2021. However, the data also revealed a contrasting trend for multi-unit dwellings, which saw a 7.3 per cent decline in the same period.
The figures, released by the Australian Bureau of Statistics, highlight the ongoing dynamics within the housing sector across all states and territories. HIA Chief Economist Tim Reardon provided insights into these trends, stating, “Building approvals for new houses increased to a new high in May 2026, up by 3.0 per cent to 10,690, the strongest month since September 2021, while multi-units decreased by 7.3 per cent in the month.”
Despite the monthly dip in multi-unit approvals, the broader picture over the last three months remains positive. Approvals have risen by 8.5 per cent compared to the same quarter a year earlier, with detached houses leading the charge at an 11.1 per cent increase, followed by a 4.6 per cent rise in multi-unit approvals. “Even with the monthly decline in multi-units, approvals over the last three months were still up by 8.5 per cent compared to the same quarter a year earlier, led by houses (+11.1 per cent), but also multi-units (+4.6 per cent),” Mr Reardon added.
The positive momentum in home building is attributed to factors such as elevated population growth and low unemployment rates. However, emerging challenges are beginning to cast shadows on the horizon. “New headwinds, including rising interest rates, fuel costs and international turmoil, have started to weigh on confidence and are already suppressing dwelling price growth in a number of markets,” Mr Reardon noted.
This current climate presents a unique opportunity for potential homebuyers. “There is a narrow window of opportunity to get into the housing market, as home prices have fallen due to the uncertainty created by the Budget. At the same time, we are not building enough homes to meet growth in demand,” he explained. Mr Reardon remains optimistic about the future, suggesting that house price growth will resume once the uncertainties surrounding the Budget and interest rate adjustments dissipate.
Reardon emphasised the critical role of market confidence in sustaining the growth of new home building. “There is only one factor that is more important to new home building than interest rates, and that is market confidence,” he asserted. He further explained that households tend to delay purchasing new homes if they lack confidence in their employment prospects and the overall economic climate.
“If market confidence returns quickly, as we expect, then the adverse economic indicators that we are seeing with the decline in home prices and anecdotal reports of a slowdown in home buying activity, will not be observed in future building approvals data,” Mr Reardon predicted. He highlighted that there is often a lag between shifts in consumer sentiment and their reflection in building approvals data.
The surge in new home sales in 2025, spurred by a cut to the cash rate, has created a buffer of work for builders. This backlog ensures that builders can continue operations without disruption, despite the recent dip in confidence. However, Reardon cautioned about the ongoing affordability crisis. “Nonetheless, with housing affordability at its worst levels in over 30 years, it is more important than ever that policymakers support housing investment and development by reducing the costs of home building, not increasing them,” he concluded.
In terms of regional performance, Tasmania led the charge with a 57.5 per cent increase in new home approvals in the three months to May 2026, compared to the same quarter a year earlier. Queensland followed with a 19.9 per cent rise, Victoria with 15.0 per cent, and South Australia with 7.2 per cent. In contrast, New South Wales and Western Australia experienced slight declines of 0.8 per cent and 0.1 per cent, respectively. The Australian Capital Territory saw a significant decline of 42.6 per cent in original terms, while the Northern Territory experienced a substantial increase of 51.1 per cent.
These figures underscore the complex and varied landscape of Australia’s housing market, as stakeholders navigate both opportunities and challenges in the months ahead.