Housing approvals rise in early 2025, but challenges remain

Over the three months to January, total dwelling approvals were up 14.0 per cent compared to the same period the previous year, with detached approvals up by 6.1 per cent and multi-units up by 27.3 per cent.

Housing Industry Association’s (HIA) economist, Maurice Tapang, said the new housing approvals were strengthening due to low unemployment, recovering real wages, and strong population growth.

“Approvals for new homes in Australia increased in January 2025, a month before the cash rate was cut,” Tapang said.

“These increases in approvals signal positive momentum heading into the new year, with households slowly returning to the market and building new homes.”

Detached house approvals varied across states, with Queensland, South Australia and Western Australia driving the national gains.

In the three months to January, detached house approvals in Western Australia rose 29.2 per cent compared to the previous year, followed by SA at 27.5 per cent and Queensland at 13.9 per cent.

The Northern Territory recorded an 85.5 per cent increase in detached house approvals, up from historically low levels.

In contrast, other jurisdictions saw declines in detached house approvals, with the Australian Capital Territory experiencing the largest drop, at 50.4 per cent.

This was followed by NSW, which saw a decrease of 9.5 per cent, Tasmania, which saw a decrease of 7.0 per cent, and Victoria, which saw a decrease of 0.9 per cent.

Tapang said the NSW declined due to high land costs and challenges in delivering new housing, particularly in Sydney.

“The rise in home building activity will be more evident in states and regions with lower land costs and lower taxes on new homes, while those with higher tax imposts will remain weak,” he said.

Tapang said that despite the slight increase in housing approvals, the country continues to face supply shortages, and more needs to be done to meet the long-term housing targets.

“Multi-unit approvals have increased from very weak levels. This needs to double from the 12-year lows of recent years to meet housing targets, but constraints on land, construction and investment remain barriers.”

He urged the Australian government to remove barriers to the housing supply in the lead of the 2025 federal election.

The Property Council’s Group executive of policy and advocacy, Matthew Kandelaars, stressed the need for sustained growth to meet housing targets.

“It's great to see approvals for apartments and townhouses reaching their highest levels since December 2022, but they are still too low,” Kandelaars said.

According to the data, approvals for private dwellings excluding houses (including townhouses and apartments) rose 12.7 per cent to 7,213.

The result is 41.6 per cent higher than one year ago, which Kandelaars said was driven by large apartment buildings in New South Wales.

He said apartment approvals have declined significantly over the past decade, with thousands fewer approved than ten years ago due to limiting construction factors such as regulatory constraints, opportunistic taxes, and low productivity.

“Apartments take nearly three years from approval to completion and face many hurdles from high construction costs, labour shortages and tax policies that deter investment and put project feasibility under pressure,” he said.

With Australia needing to build over 20,000 homes per month to reach its target of 1.2 million new homes by 2029, industry leaders are calling for government action.

“With a bold target of 1.2 million new homes, there's still much work ahead, and hopefully, we see approval numbers continue to increase,” Kandelaars concluded.

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