Australia’s housing market is showing signs of decline as new dwelling approvals fell nationally in May, with Queensland experiencing the sharpest drop, according to recent data from the Australian Bureau of Statistics (ABS). The figures reveal a 1.1 percent national decrease in total dwelling approvals, while Queensland recorded an 8.8 percent slump, signaling weakening confidence in the sector amid recent government tax changes and rising economic pressures.

The downturn coincides with ongoing efforts under the National Housing Accord, launched two years ago with the aim of delivering 1.2 million new homes nationwide by mid-2029. Industry representatives warn the country is running out of time to meet this target, with construction costs, labour shortages, and tighter investment conditions contributing to reduced supply.

Prime Minister Anthony Albanese described the recent tax reforms—particularly changes to negative gearing and capital gains tax—as positive developments that have prevented investors from outbidding first-home buyers at auctions. He emphasized a commitment to addressing what he described as a “broken status quo” and pledged that the government’s approach aims to make homeownership more accessible for new buyers.

However, critics from the opposition argue the policy has not delivered tangible improvements. Liberal frontbencher Michaelia Cash contended that the reforms have failed to increase the number of first-time buyers entering the market, reduce rental prices, or boost construction activity. Opposition sources cite discussions with major banks indicating a 26 percent decline in first-home loan approvals since the budget announcement, a point that stands in contrast to the government’s position.

The housing market’s cautious sentiment is further reflected in a recent Procore/Property Council Industry Sentiment Survey, which reported confidence levels at a five-year low following the budget changes. Market participants forecast subdued national economic growth and anticipate further interest rate increases over the coming year. Current interest rates stand at 4.35 percent, with the Reserve Bank signaling potential hikes if inflation remains elevated.

The Property Council of Australia and Master Builders Australia have both urged governments to restore favorable investment conditions, highlighting the importance of low interest rates, economic stability, and productivity enhancements. Matthew Kandelaar of the Property Council noted that as investment barriers rise, fewer housing projects proceed, resulting in reduced supply, which could apply upward pressure on home prices despite recent price stagnation. Meanwhile, Master Builders Australia projects that recent budget measures could result in approximately 9,000 fewer new homes built nationally over four years, with about one-fifth of the reduction occurring in Queensland.

While New South Wales and Western Australia reported modest increases in approved homes—2.2 percent and 7.8 percent respectively—the national outlook remains cautious. The combined effects of policy changes, inflationary pressures, and labour market constraints suggest the housing sector may face a challenging period ahead, potentially extending into a multi-year downturn.