Housing pipeline bottlenecks ease

18 May 2026

New analysis of ABS housing data has revealed that the number of stalled new homes fell in Australia’s largest cities over the past year, as the country gets more homes out of the ground to combat the housing affordability crisis.

Nationally, the number of approved homes yet to start construction fell by 7 percent over the year to December 2025, with declines recorded in most major metropolitan markets, according to analysis by KPMG Australia.

“Interest rate cuts in 2025 and a tempering of construction costs have played a big role in helping unclog this pipeline of stalled builds over the past 12 months,” KPMG Urban Economist Terry Rawnsley said.

Sydney, which had the largest backlog, saw approved but not yet commenced dwellings fall by 10.1 percent over the year, dropping to 9,376 in December 2025. This marked a notable turnaround after backlog levels peaked earlier in the year at 11,728.

Melbourne recorded the sharpest improvement among the major capitals, with the number of dwellings yet to commence down 19.5 percent compared with a year earlier, despite a modest uptick in the December quarter.

In Perth, the backlog declined by 6.9 percent over the year, while Adelaide recorded a small fall of 1.8 percent, which indicated broadly stable conditions.

Brisbane was the main exception among the largest cities, with approved but not commenced dwellings up 10.2 percent over the year, reflecting continued strong demand and capacity pressures in the Queensland market.

"The downturn across most major cities hints at a pivotal shift, with long-stalled housing projects finally breaking ground, easing the build up of homes stuck in the pipeline,” Mr Rawnsley said. “This signals a cautiously optimistic outlook for boosting future housing supply."

Mr Rawnsley said that the measures announced in last week’s Federal Budget would not have a significant impact on supply.

“The Federal Budget included a range of measures that will influence housing supply through infrastructure investment and changes in investor behaviour,” he said.

“However, these measures are likely to have only a marginal impact, housing supply will remain primarily determined project by fundamentals such as construction costs and sale prices for new homes.”

Sydney significantly reduces stalled builds

Approved but not yet commenced (ANYC) dwellings per new commencement in Sydney shows that while the backlog has fluctuated over time, the worst of the construction bottlenecks now appear to be easing.

Historically, for every Sydney dwelling which had commenced construction there has typically been between 1.0 and 1.3 approved but not yet commenced dwellings sitting dormant. This ratio reflects normal pipeline conditions where it takes times for construction to begin.

Increases in the ratio sometimes reflect more projects entering the system, rather than projects being delayed.

However, in 2023 and early 2024, that ratio peaked at around 1.8 ANYC for every commencement, indicating a significant build up of projects waiting to start amid labour shortages, cost pressures and capacity constraints.

By December 2025 conditions improved markedly, with the ratio falling to 0.84, the lowest level since the COVID lockdowns and construction restrictions in Sydney. This means commencements are now running ahead of new approvals in the pipeline, actively working down the backlog.

“Sydney is the epicentre of the nation's housing crisis and the most constrained market when it comes to residential construction. To see the backlog of stalled builds finally moving shows Sydney’s construction sector has shifted from congestion toward catch up mode,” Mr Rawnsley said.

Despite the improvement, Mr Rawnsley says Sydney still needs substantially more dwellings to be approved, commenced and completed to meet underlying population growth and housing demand.

“Clearing the backlog is an important step, but sustained increases across the entire development pipeline will be essential if housing shortages are to be meaningfully addressed.”