Another fall in approvals highlights soft housing pipeline despite strong data centre projects
Building approvals fell for a second consecutive month in January, underlining a softening housing pipeline even as data centre projects push non-residential values higher.
Latest figures from the Australian Bureau of Statistics showed that the total number of dwellings approved dropped 7.2% in January to 14,564 in seasonally adjusted terms, extending a 14.9% decline in December. The fall was driven by a sharp 24.5% slide in private sector multi-unit approvals, while approvals for private detached houses edged 1.1% higher and are 7.1% above year‑earlier levels.
On a trend basis, total private building approvals dipped 0.1% in January but remain 6.1% higher over the year. Through the 12 months to January, 193,478 dwellings were approved nationwide, up from a trough of about 165,000 in mid‑2024, though momentum has cooled as growth in trend approvals moderates.
“Building approvals retreated by 7.2% in January in seasonally adjusted terms,” said Lucinda Jerogin, associate economist at Commonwealth Bank of Australia. “This was below our and the consensus forecast for a 5% monthly lift and followed a sizeable 14.9% decline in December.”
State-level trends were mixed. The Northern Territory recorded the steepest monthly fall in trend approvals at 4.5%. Victoria, the Australian Capital Territory and Queensland also posted declines, while Western Australia, Tasmania and New South Wales registered gains.
Over the year, the strongest growth in approvals has been in the ACT and the NT, although Victoria still has the highest number of approvals in absolute terms despite underperforming on annual growth.
The value of total building approvals rose 7.3% in January to $17.7 billion in nominal terms. In trend terms, the value of approvals increased 0.7% in January and 12.5% over the year.
Residential approval values eased 0.3% in the month but are 6.6% higher than a year earlier, while non-residential trend approvals rose 2.0% in January and 21.3% over the year.
Since mid‑2024, non-residential strength is concentrated in data centres, which the Australian Bureau of Statistics classifies as “other commercial buildings.” On a rolling annual basis, approvals in this category have surged 197.2% over the year to January, compared with a 14.7% rise for all other non-residential approvals. Since 2019, the gap between data centres and other commercial building activity has widened further.
The impact is particularly clear in Victoria, where private commercial building approvals on a rolling annual basis far exceed those in other states and territories. In January, New South Wales and Victoria were the only jurisdictions to record monthly increases in private commercial building approvals, up 6.7% and 5.9% respectively.
Looking ahead, Commonwealth Bank expects building approvals to trend higher through 2026, albeit at a more moderate pace. The bank notes that risks are skewed to the downside, particularly given expectations that the Reserve Bank of Australia will raise the cash rate in May. Any further tightening is likely to weigh more heavily on residential approvals and subsequent building activity, as these segments tend to respond most directly to changes in interest rates.
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