Unemployment rises, housing approvals fall and Melbourne leads the auctions again | Property Insiders

Could the weakening jobs market bring Australia closer to the end of interest rate increases, even as buyers remain cautious about property?

At the same time, another fall in building approvals raises concerns about how much new housing will be available when confidence eventually returns.

These forces operate over different timeframes, which helps explain why our property markets can remain subdued today while conditions for a future recovery gradually develop.

In this week’s Property Insiders, Dr Andrew Wilson and I examine the latest employment figures, the uneven housing construction pipeline and the weekend’s auction results.

In our chat this week, you will hear that while we believe that values could come under further pressure over the coming months, My Housing Market figures for the month of October, which will be released in a couple of days, has some good news for the Melbourne and Sydney housing markets.

The labour market is still easing

Watch this week's Property Insider chat as Dr. Andrew Wilson explains how Australia’s seasonally adjusted unemployment rate increased from 4.6% to 4.7% in September.

Employment fell by 39,300 during the month, while the number of unemployed Australians increased by 8,900.

The participation rate also declined to 66.8%, indicating that a smaller proportion of working-age Australians were working or actively looking for work.

Taken together, these figures show a softer monthly result than an increase in unemployment caused by more people entering the workforce. There were fewer people employed as well as more people unemployed.

It's worth remembering that monthly labour force figures bounce around, and the ABS itself recommends the trend series as the best guide, with the trend unemployment rate sitting at 4.6% in September after rising gradually from 4.2% in March.

The ABS has also flagged that its recent changes to survey methodology may have had a small residual effect on the September seasonally adjusted figures, which is another reason not to read too much into any single month.

From a property point of view, a jobless rate of 4.7% is not a crisis, and it's still below the 5% to 6% levels that were normal through most of the 2010s.

What matters most for housing is that the vast majority of people keep their jobs and keep paying their mortgages, and that is still the case.

However, a weaker jobs market does chip away at confidence, and confidence is what gets buyers to put their hands up at auctions and lenders to approve loans, so this is something I'll be watching closely over the next few months.

What does this mean for interest rates?

In my opinion, the latest employment figures strengthen the case for the Reserve Bank to proceed cautiously.

Higher borrowing costs take time to work through the economy, and households and businesses continue adjusting their spending well after an interest rate decision is announced.

That creates a risk that policy continues tightening while the effects of earlier increases are still unfolding.

Nevertheless, one weaker employment report does not guarantee an interest rate pause or bring forward a rate cut. The RBA will also consider inflation, wages, spending and the broader economic outlook.

For property buyers, greater confidence that interest rates have stopped rising could help reduce uncertainty, even before borrowing costs actually decline.

But I would still build a purchase around repayments you can comfortably manage today, with a buffer for unexpected expenses or further financial pressure.

Victoria continues to face the highest unemployment

Andrew’s report also highlights meaningful differences between the mainland states.

Victoria recorded the highest unemployment rate at 5.1%, followed by New South Wales at 4.7% and Queensland at 4.5%.

South Australia and Western Australia had the lowest rates, both at 4.2%.

These differences matter because local employment conditions influence household confidence, rental demand and the capacity to purchase a home.

However, statewide figures provide only part of the picture, particularly in large cities where employment opportunities and household incomes vary considerably between suburbs.

This is why I place so much emphasis on a location's demographics. For a long-term investment, I favour established areas with diverse employment access and residents whose incomes give them greater capacity to compete for desirable housing over time.

Housing approvals have fallen again

Watch this week's Property Insider chat as Dr. Andrew Wilson reports that the latest building approvals figures provide another reason to be concerned about the supply of new housing.

According to the ABS, total dwelling approvals fell 6.1% in August to 16,953.

The result was driven by a 21.2% decline in private dwellings excluding houses, a category that includes apartments and townhouses, while private house approvals rose 3.7% to 10,885.

There is a substantial difference between the performance of detached houses and the broader medium- and higher-density sector.

Apartment approvals are volatile because a relatively small number of large projects can shift the monthly result considerably.

Even allowing for that volatility, an uneven pipeline makes it harder to deliver a sustained increase in housing supply.

Andrew’s report shows that the broader approvals trend remains subdued, despite improvement in some markets and categories.

Approvals are only the beginning

An approved development still needs to become a financially viable, funded and completed project before anyone can move in.

• Also read:Unemployment rises, housing approvals fall and Melbourne leads the auctions again | Property Insiders
• Also read:This week’s Australian Property Market Update – Latest Data, State by State October 27th 2026
• Also read:Latest Property Price Forecasts. Australian Property Market Outlook 2026-2027: Navigating a Market Correction
• Also read:National Weekly Auction Report – October 24th 2026 | More Underwhelming Home Auction Results Over Past Week
• Also read:Everything you need to know about the state of Australia’s property markets in 20 charts – October2026

Developers need to secure finance, arrange construction and achieve selling prices that justify the cost and risk of proceeding.

When those conditions become difficult, projects can be delayed or redesigned, and some may never get built.

That’s why I am cautious about treating an improvement in approvals as evidence that the housing shortage is about to disappear.

We need a sustained flow of completed homes in locations where people want to live, with housing types they can afford.

The distinction matters for investors because today’s construction decisions influence the competition their properties will face several years from now.

A housing shortage can coexist with falling prices

I can imagine that some readers would understandably wonder how property values can soften when we still need more housing.

The explanation is that housing need and purchasing capacity operate differently.

People may need somewhere to live but be unable or unwilling to take on a larger mortgage, especially when borrowing costs are high and confidence is weak.

That can keep purchase prices under pressure even when accommodation remains scarce. Of course, this is only likely to increase rental demand and lead to higher rentals.

When you split these trend between houses and units, the picture becomes clearer.

House approvals have been climbing steadily, with the trend rising from 9,194 a year ago to 10,885 a month now, while unit approvals have slipped from 5,794 to 5,674.

This matters because apartments are where most of the new supply in our inner and middle-ring suburbs needs to come from, and right now high construction costs, higher interest rates and tighter lending conditions are making many projects unviable.

It's also worth comparing these numbers with the federal government's Housing Accord target of 1.2 million new homes over five years, about 20,000 homes a month.

We're approving around 16,500 homes a month on trend, and approvals are only the first step, as not every approved project gets built and those that do take a year or more to complete.

In other words, we are continuing to fall well short of what's needed, and I can't see that changing any time soon.

On the auction front

The weekend’s auction results showed that buyers remain cautious, with considerable variation between the capital cities.

Melbourne recorded the strongest clearance rate among the cities in this week’s report.

That is encouraging, particularly given the increase in auction volumes, but one stronger weekend does not establish a lasting recovery.

We need to see whether improvements persist across several weeks and whether they are accompanied by stronger buyer attendance, shorter selling times and less vendor discounting.

Auction clearance rates also need to be interpreted within each city’s market, because auctions account for different shares of total sales.

I would be particularly careful about drawing conclusions about Brisbane or Adelaide as a whole from their auction results alone.

For buyers, the useful message is that conditions generally allow more time to investigate a property and negotiate, although desirable homes can still attract competition.

What this means for property investors

When you put this week's data together, you get a picture of an economy that is slowing under the weight of four rate rises this year, with fewer jobs, fewer new homes being approved and auction markets that have lost momentum.

That's the type of backdrop that keeps most buyers on the sidelines and fills the media with gloomy headlines.

But I've been investing for long enough to know that the best buying opportunities rarely come when the news is good.

Right now, strategic investors are facing less competition, more choice, and sellers who are willing to negotiate, which is a very different environment from the frenzy of a year ago, when clearance rates were near 70%.

At the same time, the long-term fundamentals haven't changed, as our population keeps growing and we are still building far fewer homes than we need, particularly in Melbourne.

When interest rates eventually start to fall, as most economists expect in 2027, pent-up demand will meet a shortage of supply, and the investors who bought well during this downturn will be the ones who benefit.

The key words there are 'bought well', because this is not a market in which every property will do well.

I'd be focusing on established, investment-grade homes and well-located apartments in boutique blocks in the inner and middle-ring suburbs of our big capital cities, where there is strong owner-occupier appeal and limited opportunity for new supply.

I'd steer clear of high-rise off-the-plan apartments, outer-suburban house and land packages and regional 'hotspots' that rely on momentum rather than fundamentals.

Just as importantly, now is the time to be conservative with your finances, so make sure you have cash flow buffers in place in case the RBA moves again, and don't stretch your borrowing to the limit just because a property looks like a bargain.

The investors who do well over the long term are those who bought the right property and were able to hold on to it through the cycle.

Get the right advice before your next move

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