Key Points: 

• High underlying inflation, high interest rates, rising costs and falling consumer sentiment reflected in ABS Building Approvals data for July. 

• Approvals for detached houses fell in July 2026 by 4.2% across the country

• In NSW detached housing approvals fell by 4%

• SA had the biggest fall in detached housing approvals of 10.7%

Building Approvals for July 2026 shows that persistently high inflation is increasingly weighing on residential building activity.

Approvals for detached houses in NSW fell bv 4% in July and by 8.1% for all dwellings, Across the nation the number of new dwellings approved fell by 3.6% (17,687) and the fall in approvals for detached housing was even higher at 4.2% (10,199). 

While monthly data is volatile and we can't overreact to one set of numbers, the results for July show that approvals for detached dwellings have fallen in every state where the data is collected.

Seasonally Adjusted State By State Detached Housing Building Approvals For July 2026

Approvals rarely decline consistently across all jurisdictions in the same period due to local factors. We should be concerned if the July results mean that stubbornly high inflation is further strengthening its malign grip on the housing sector.

The latest Consumer Price Index (CPI) data for July confirms that inflationary pressures remain deeply entrenched across the Australian economy, with underlying inflation showing little sign of easing despite a modest decline in the headline rate. The ABS reported annual CPI of 3.5% in July, down from 3.8% in June, while the Reserve Bank's preferred measure of underlying inflation, the trimmed mean, remained unchanged at 3.6 %.

The underlying inflation remains stuck at 3.6% and accelerated strongly through July demonstrates that price pressures have not gone away. In fact, they appear to be strengthening. 

The persistence of elevated underlying inflation is minimising the impact of higher interest rates and keeping the cost of borrowing higher for longer eroding the confidence of both home builders and prospective buyers.

Construction businesses continue to face elevated labour, materials, financing and compliance costs, while persistent inflation increases the likelihood of further monetary policy tightening,” he said.

Inflation has become the number one factor affecting project feasibility across the industry. Every additional cost increase pushes more projects below the viability line and reduces the number of homes, apartments and commercial projects that can be got out of the ground,” Matthew Pollock said.

Housing costs remain a major contributor to inflation, reflecting ongoing increases in new dwelling construction costs as builders continue to face higher labour and material expenses," he said.

Federal Government policies are contributing to building firms being squeezed from all sides. The latest Average Weekly Earnings data shows that despite wage increases, household income is not keeping pace with inflation.

The worry is that people are simply running out of cash to invest in building services.