Key takeaways
Australia's home building pipeline continues to shrink. National building approvals fell a further 2.0% in April following an 11.8% fall in March, and annual approvals across capital cities are now running 24.5% below the 2016 peak.
Unit approvals have been hit hardest. Capital city unit building approvals have fallen more than 41% from their 2016 high, creating a deepening structural shortage in the very dwelling type most in demand from renters and first-home buyers.
Building costs keep rising. The National House Building Costs Index reached 165.2 in April - up more than 63% since its January 2018 base - making it increasingly expensive to fill the supply gap even if approvals were to improve.
Auction markets are subdued but holding. Clearance rates across Sydney and Melbourne were steady week-on-week despite a post-holiday surge in listings, though they remain well below the levels seen this time last year.
Everyone wants cheaper housing, but the latest building approval numbers show Australia is still failing at the one thing that would actually help - building more homes.
In other words, Australia's home building crisis is getting worse, not better.
As I see it, what's happening right now in building approvals are one of the most important stories unfolding for property investors.
Because when supply keeps falling while demand stays strong, there's really only one thing that happens to property values over time.
And that’s a real problem, because while politicians talk about housing affordability, rental relief and population growth, the one thing we need most - more well-located housing - is still not coming through fast enough.
In this week's Property Insiders chat Dr. Andrew Wilson takes us through the latest ABS building approvals numbers, updated house building cost data, and the most recent weekend auction results from around the country
As you will read below, the picture that emerges is one that long-term property investors should understand clearly, because while the current environment feels uncertain on the surface, the underlying supply dynamics continue to point firmly in one direction.
Home building keeps falling
Watch this week's Property Insider chat as Dr Andrew Wilson explains how the latest ABS data shows national building approvals fell 2.0% in April, following an 11.8% fall in March.
Both houses and units approvals moved lower. Houses fell 1.0% over the month, while the more volatile unit category dropped 3.6%.
South Australia was the exception, with total approvals rising 4.3% over April - a welcome result but one that couldn't offset weakness elsewhere across the country.
However, the longer-term numbers tell the real story. Capital city annual dwelling building approvals have now fallen 24.5% from their 2016 peak of 189,409 to just 143,098.
We were building far more homes a decade ago than we are today, and we have significantly more people in need of housing.
Units are the dwelling type most needed to house renters, students, young professionals, downsizers and first-home buyers, but they are also the dwelling type where supply has fallen furthest and fastest.
This is the main reason why our rental markets remain so tight - we are not building enough of the homes that renters actually live in. And we haven't been for years.
Building costs: still heading the wrong way
Watch this week's Property Insider video as Dr Andrew Wilson explains that alongside the approvals data, the National House Building Costs Index tells an equally important story.
The index reached 165.2 in April, up from 158.3 a year earlier. To put that in context, the index was at just 101.5 in 2021, and it started at a base of 100 in January 2018.
In other words, building a new home now costs more than 63% more than it did eight years ago.
- Also read:Australia’s Building Crisis Is Getting Worse – What It Means for Property Investors | Property Insiders
- Also read:Australian housing market update | June 2026
- Also read:This week’s Australian Property Market Update – Latest Data, State by State June 16th 2026
- Also read:Melbourne housing market update | June 2026
- Also read:National Vacancy Rate Holds at 1.2%| SQM Research
The annual growth rate in building costs has eased from its peak of 23.2% reached in 2022, and the current rate of 4.4% is more manageable than that extreme. But costs are still rising, not falling, and they are rising faster than general inflation.
This means the cost of building new housing supply is higher than it was, which makes new supply less financially viable for developers and builders.
It means established property in desirable locations becomes relatively more attractive compared to new construction.
And it places a natural floor under the value of existing homes, because replacing them costs significantly more than it once did.
For investors holding established properties in well-located suburbs, the rising cost of replacement is one of the supports that doesn't get talked about enough at a time when many are predicting falling property values.
Auction markets: subdued, steady, and waiting for spring
It's always Dr. Andrew Wilson and I discuss the weekend's auction clearance results in our Property Insider chat.
Capital city auction clearance rates were again generally steady over the past week despite a surge in listings following the previous week’s holiday distractions.
The national weekend auction market reported an average clearance rate of 49.8% over the past week, slightly lower than the 50.5% reported the previous week and well below the 65.0% reported the same week last year.
Auction markets continue to produce subdued buyer results with no realistic prospect of a revival without interest rate cuts until at least the spring selling season in three months’ time.
What this means for property investors
When you look at these three datasets together - building approvals, building costs, and auction markets - a clear picture emerges.
Supply is not keeping pace with need, and the gap has been widening for a decade.
The homes that need to be built most, particularly attached dwellings in our capital cities, are being approved and built at rates 41% lower than in 2016.
The cost of delivering new supply has risen more than 60% in eight years.
And buyer sentiment in the current cycle is subdued, with auction markets running well below last year and unlikely to recover materially before spring.
For investors with a short-term focus, the softer market might feel like cause for concern.
I've been through enough property cycles to know that the times when buyer sentiment is soft are precisely the times when patient investors with a long-term perspective tend to find the best value.
Markets are not improved by waiting for perfect conditions. By the time clearance rates are running at 70% again and every agent is telling you it's a great time to buy, competition will be fierce and prices will have already moved.
If you'd like to understand what all of this means for your own investment strategy and where the right opportunities exist right now, the team at Metropole would be glad to help.
Click here now and organise a Wealth Discovery Chat with one of our wealth strategists.
