Australia is steadily falling further off track from its ambitious national housing construction goals, after new official data revealed a sharp double-digit drop in building approvals during March that has deepened concerns over ongoing supply shortages and affordability crises across the country.
Data published by the Australian Bureau of Statistics (ABS) shows that just 17,300 new dwellings — including standalone homes, apartments, semi-detached properties and townhouses — received planning approval across the nation in March. This marks a 10.5% decline from February’s revised figure, which hit a more-than-four-year high of 19,339 approved projects. Over the 12-month period ending in March, national total dwelling approvals reached 198,396, a figure that remains well short of the annual benchmarks laid out in the federal government’s key housing policy.
Under the National Housing Accord, all Australian state and territorial governments have committed to delivering 1.2 million new homes over five years, which translates to an annual target of 240,000 new constructions by June 2029. Economists warn that the latest approvals data confirms the nation is not on course to hit this goal, with a cascade of economic and geopolitical headwinds piling relentless pressure on the domestic construction sector.
AMP senior economist My Bui identified multiple overlapping factors dragging on the sector: the ongoing conflict in the Middle East, which has disrupted global energy markets, combined with persistent domestic labour shortages, rising construction material costs, and elevated interest rates have all created significant barriers to ramping up new home construction. “With these ongoing headwinds hitting the construction sector, from rising material and labour costs to tighter financing conditions, it’s increasingly likely that we will keep slipping further and further away from the National Housing Accord’s annual housing targets,” Bui explained.
Lucinda Jerogin, associate economist at Commonwealth Bank, echoed these concerns, noting that the drop in approvals itself creates an additional layer of pressure for construction firms operating in the already strained market. “Headwinds are continuing to build, as higher interest rates and rising input costs weigh heavily on sector profitability and project pipeline,” Jerogin said. “We expect new dwelling cost inflation to accelerate in the coming months, following a series of recently announced price hikes for core construction materials.”
The latest housing data comes amid a broader resurgence of inflationary pressure across Australia. Last Wednesday, ABS data confirmed that the national Consumer Price Index rose 4.6% in the 12 months to March 2026, hitting the highest annual inflation rate since September 2023, when the Australian economy was still in its post-COVID-19 rebound phase. Fuel prices have been the single largest driver of this recent inflation surge: petrol prices jumped 32.8% in March alone, pushing up overall transport costs by 9.2% over the 30-day period.
This spike in global energy prices can be traced directly to escalating geopolitical tensions in the Middle East. Since the outbreak of open conflict between Israel and Iran that began at the end of February, oil markets have seen extreme volatility. Tensions have also disrupted shipping through the Strait of Hormuz, the critical global chokepoint through which roughly 20% of the world’s daily oil supplies pass, pushing up global crude prices significantly and raising transport and production costs for industries across Australia, including construction.
Breaking down the approvals data at the state level, Victoria outperformed all other Australian jurisdictions in March, recording 5,102 total dwelling approvals, including 2,853 approvals for standalone houses. New South Wales followed closely behind with 4,445 total approvals, 2,351 of which were for houses — marking the strongest monthly growth in house approvals for the state since 2024. Queensland came in third with 3,910 total approvals and 2,258 house approvals.
Western Australia recorded 2,158 total dwelling approvals (1,632 houses), while South Australia logged 1,632 total approvals and 816 house approvals for the month. The Australian Capital Territory recorded 337 approvals, Tasmania recorded 209, and the Northern Territory recorded just 46 new dwelling approvals in March.
The ongoing shortfall in new housing supply continues to worsen Australia’s long-running housing affordability crisis, pushing up rental and property purchase prices and putting home ownership out of reach for many aspiring Australian buyers, particularly young couples and first-time entrants to the property market.