Key Highlights

  • Total dwelling approvals rose 5.1% to 17,948 in seasonally adjusted terms.
  • Private house approvals fell 5.3% to 10,432.
  • Apartment approvals rose 25.6% in original terms.
  • No. The ABS did not attribute the change in approvals to tax policy.

Apartment approvals have jumped sharply just as approvals for detached houses slipped, according to the latest Australian Bureau of Statistics (ABS) building approvals figures. The September results arrive four months after the federal budget announced that negative gearing would be limited to newly built homes for future purchases. The pattern looks like what that rule is meant to encourage, but the data does not show the tax change caused it.

What the September approvals data shows

The ABS reported on 2 November that total dwelling approvals rose 5.1% in September to 17,948 in seasonally adjusted terms.

The detail matters more than the headline. Private sector house approvals fell 5.3% to 10,432, which the ABS said was the largest fall since August 2025.

Private dwellings excluding houses, which covers apartments and townhouses, rose 16.6% to 6,579 in seasonally adjusted terms.

In original terms, which are not adjusted for seasonal patterns, apartment approvals rose 25.6% to 4,129 and townhouse approvals rose 8.3% to 2,792.

Daniel Rossi of the ABS said New South Wales "had the biggest rise in apartment approvals". By state, total dwelling approvals were 5,322 in NSW, 4,382 in Queensland, 3,694 in Victoria, 2,206 in Western Australia and 1,646 in South Australia.

Not every measure was positive, and the monthly mix can change quickly. The ABS said the value of residential building fell 2.8% to $11.06 billion.

The new-build negative gearing rule, explained

The tax change in the background is enacted law, not a proposal. Under the Tax Reform No. 1 Act 2026, negative gearing will be limited to new builds for residential properties bought after 7:30pm AEST on 12 May 2026, with the restriction applying from 1 July 2027.

Properties held before that time are grandfathered, so existing investors keep their current treatment on those holdings. Investors weighing a purchase now are, in effect, already making decisions under the new regime, even though it does not bite until mid-2027.

In broad terms, negative gearing lets an investor deduct a net rental loss, where interest and other costs exceed rent, against other income such as wages. Under the new rules, that benefit remains available for newly built dwellings but not for established homes bought after the cut-off.

The policy logic is that steering investor Demand towards new stock should support construction. Apartments and townhouses are the type of new product investors have traditionally bought off the plan.

Hypothetical example: why the rule may favour new stock

Hypothetical example: an investor buys a property after the 12 May 2026 cut-off. In a given year after 1 July 2027, interest, rates, insurance and other costs exceed rent by $8,000. Assume a marginal tax rate of 37% plus the 2% Medicare levy, or 39% combined.

If the property is a qualifying new build, the $8,000 loss could reduce tax on wage income by about $3,120 ($8,000 × 39%).

If the property is an established home bought after the cut-off, that $3,120 reduction against wage income would not be available in that year under the new rules. How any quarantined loss can be used later depends on the detail of the legislation and individual circumstances.

The example uses invented figures and simplifies the law. It shows why a new apartment may look relatively more attractive on paper to some investors than an established unit with similar rent.

Why causation has not been proven

The ABS itself does not attribute the rise in apartment approvals to tax changes. Its release describes the movements without linking them to the negative gearing rule.

Apartment approvals are also volatile from month to month. A handful of large projects in one state can shift the total, and NSW alone accounted for the biggest rise.

Approvals also reflect decisions made well before the paperwork lands. Large apartment projects typically take many months of planning, financing and design before approval, so some of September's projects were likely in the pipeline before the May budget.

Other forces are pulling in the opposite direction. The Reserve Bank of Australia (RBA) said in its November Statement on Monetary Policy that housing prices had fallen since a March peak mainly because of monetary policy and tax changes in the federal budget. Rising rates usually weigh on construction rather than lift it.

The RBA also noted that HIA new home sales had "declined materially", with builders reporting fewer enquiries and lower conversion rates. That is a caution against reading one encouraging approvals month as a sustained investor shift.

The bigger Supply picture

Even with September's lift, approvals remain short of the national housing target. Dwelling approvals totalled 208,181 in the year to August, compared with the 240,000 a year needed to reach 1.2 million homes by 2029 under the Housing Accord.

That is a gap of 31,819 approvals on an annualised basis. The same report cited the National Housing Supply and Affordability Council's estimate that completions are running at about 175,000 a year.

The RBA's forecasts point to a tougher stretch ahead. The bank expects dwelling Investment to grow 5.1% in the year to December 2026, then fall 2.8% in 2027, 3.5% in the year to June 2028 and 1.8% in 2028.

Builders in the RBA's liaison program cited "higher interest rates, tax reforms and broader economic uncertainty". The RBA lifted the cash rate to 4.85% on 3 November. Its forecasts assume the cash rate sits around 4.9% by mid-2027 and about 4.8% from late 2027, which offers developers little relief on funding costs.

What to watch

Several releases will show whether September marks a trend or a one-off.

- The ABS October building approvals release, expected in the coming weeks, will test whether the apartment rise holds. - Cotality's December home value index, due 1 December, will update the price picture. - MYEFO, due in December, may give the first official read on Revenue from the CGT and negative gearing changes. - 1 July 2027 is when the new-build negative gearing restriction and the switch from the CGT discount to indexation take effect.

Until several months of data line up, the apartment jump is best seen as consistent with the new-build rule, not as proof that it is working.