Australian dwelling approvals fell to a 19-month low in January after declining by 7.2% in the opening month of 2026, a material surprise on expectations for a 5% rise. Higher-density or unit approvals were down 21% on the month following an even larger fall in December (-32.7%). By contrast, house approvals notched a 1.2% rise to reach their highest level since August 2022. Despite favourable dynamics of rising housing prices and RBA rate cuts, dwelling approvals failed to fire in 2025. They now head into 2026 where the RBA has already started to reverse course.
Dwelling approvals fell to their lowest level since June 2024 after a 7.2% decline in January (14.6k). Because of the volatility in the series, consider that approvals averaged 16.2k per month over the past 3 months. In January 2025, approvals were averaging 16k. This highlights that growth in approvals has been remarkably subdued, especially when taking into account that the RBA cut rates on 3 occasions through this period. House approvals have risen - though it has been a slow grind - leaving swings in the much more volatile higher-density segment to dictate the overall direction of approvals.
The available estimates point to broad-based weakness across the higher-density segment. Approvals have trended downwards for high-rise and townhouses. Low-rise approvals have also been weak.
Drilling down further, Melbourne looks to be the city that has driven the weakness in this segment, though other cities have also played a role.
Work approved in the alterations space climbed to new heights at just below $1.3bn on the back of a 1.6% lift in January. This comes after an increase of a little more than 4% in the final quarter of last year. This looks largely to be a price-driven increase, with recent construction activity data indicating that the volume alteration work completed largely stalled in the December quarter.
