Fresh ABS data shows dwelling approvals down 3.4% in April, as Labor faces parliamentary grilling on tax reform
Fresh data showing a further decline in dwelling approvals landed this Tuesday, just as Australia's parliament was consumed by one of the most fractious tax debates in years.
The dwelling approvals data was decidedly mixed. While the total number of approvals fell 3.4% in April to 16,710, according to seasonally adjusted data released by the Australian Bureau of Statistics (ABS), it still marked the third consecutive month of over 10,000 private sector houses approved – the first time that has occurred since late-2021.
Private sector house approvals fell 1% but remained at elevated levels.
ABS head of construction statistics Daniel Rossi said the monthly fall was driven by a 3.6% decline in private dwellings excluding houses, following a sharper 25.7% fall in March.
"New South Wales was the driver of the overall fall, down 13.8%,” noted Rossi. “This comes off last month which had the highest number of houses approved since August 2022.”
South Australia slightly offset the poor NSW figures by rising 11.4%, while Victoria was 2.2% up. Private sector house approvals in Queensland rose 0.9%, reaching the highest level since August 2021.
Despite the monthly overall dip, total approvals remained 10.2% higher in year-on-year terms.
In CreditorWatch chief economist Ivan Colhoun’s view, the positives outweighed the negatives. “Building approvals have steadily improved over the past six to nine months, setting the scene for stronger residential building activity in the second half of this year,” he said.
Colhoun is keeping an eye on the trend for approvals in coming months and what that signals about activity late this year and into 2027. On this note, he is less optimistic.
“That does not seem likely to be as favourable with higher interest rates, easing house prices or slowing rises, taxation uncertainty and continuing conflict in the Middle East all affecting the outlook. It makes it even more important that a swift resolution to the Middle East crisis occurs,” said Colhoun.
The house price Catch-22
It’s not just building approvals showing mixed signals.
On the house price front, Sydney and Melbourne posted declines of 0.9% and 0.8% respectively in May, leaving both cities 2.1% and 2.9% below their cyclical peaks recorded in November 2025. Westpac has since revised its outlook to flat growth across the major capitals for the year, forecasting Sydney will decline 3% and Melbourne 4%, attributing the weaker trajectory to rising interest rates and the federal government's CGT and negative gearing changes.
House prices are a thorny issue for the government.
Labor’s ambition to rebalance the housing market in favour of first-home buyers would logically involve reducing unsustainably high house prices – but the risk of alienating the powerful property lobby forces caution.
“We’re not targeting a particular price outcome, a particular percentage, or dollar figure when it comes to housing,” Chalmers said on Tuesday. “Our job is to make sure that there are more affordable options for first-home buyers to get a toehold in the market.”
Regardless, the market is clearly cooling, with national dwelling prices rising just 0.3% in April before flatlining in May.
There is a contradiction at play here – the same forces bringing house prices within reach of first-home buyers are threatening to undermine the construction activity needed to house them.
"For the industry, price declines are generally negative," Colhoun said. "When prices drop, you tend to see less turnover in the market and you tend to see less activity." He pointed to the speculative builder as an early casualty – developers who build to sell lose their incentive when price growth stalls. "Obviously (they) won't take that risk," he said. "So activity tends to drop."
Colhoun identified numerous major forces now bearing down simultaneously on build rates: the federal government's CGT and negative gearing reforms, three successive interest rate rises, declining prices, and rising construction material costs. "It just seems like there's three or four big factors working against it," he said.
Colhoun cautioned that the policy changes are too recent to have fully fed through to the data. "We will find out what the story for 2027 is going to be by what approvals do in the next three to six months. And I expect them to be under a bit of pressure,” he said.
The dilemma cuts to the heart of Labor's housing agenda.
The government has staked its political credibility on making home ownership more accessible for first-home buyers. But Colhoun suggested that lower prices may suppress the very supply growth needed to solve the shortage in the first place.
Falling prices deter developers, rising construction costs make new builds less viable, and higher interest rates reduce borrowing capacity across the board.
A fierce parliamentary battle
These numbers have done little to soften the political temperature in Canberra.
The Federal Budget, handed down on 12 May, contains two headline tax measures with huge implications for property investment: the restriction of negative gearing for residential property to new builds only, and the replacement of the existing 50% capital gains tax (CGT) discount with cost-base indexation and a 30% minimum tax rate.
Opposition Leader Angus Taylor condemned the "toxic taxes" in fiery Tuesday parliamentary debates and confirmed the Coalition would attempt to block the legislation. Taylor previously went as far as to call prime minister Anthony Albanese "an arrogant p***k” for not taking the policies to the previous election, a statement Albanese said “isn’t appropriate”.
Taylor continued the tirade before parliament on Tuesday, urging Labor to call an election to give voters a say on the highly contentious Budget measures.
"The prime minister didn't have the guts (to take the Budget to an election),” said Taylor. “He knew millions of Australians would have voted against higher taxes, had he done so. So instead, he misled Australians prior to the last election."
"Call an election,” Taylor demanded.
In an attempt for diplomacy, Labor treasurer Jim Chalmers defended the Budget. "This is about making a difference… It's about taking the hard road of reform, not the path of least resistance," he said. "It's about making difficult decisions and dealing with issues neglected for too long, even when it would be easier to do nothing at all. Most of all, it's all about cutting taxes for workers, making it easier to buy a first home, and better aligning the tax treatment of labour and asset income.”
