Australia's apartment and medium-density sector is caught between two competing signals. Commencements are rebounding strongly, but approvals are falling - and the gap between those two data points is where the real risk sits for developers and project marketers heading into the second half of 2026.
That's the central tension in RPM Group's National Economic Report for Q1 2026, published this month, which draws on the most recent ABS data available to June 2026.
Other dwelling commencements, the category covering apartments and townhomes - surged 56% annually accross Australia, and 16.3% for the quarter in December 2025, reaching 24,167 dwellings.
South Australia led with a 102.9% annual increase, followed by Victoria at 96.2%. Queensland and Western Australia also posted strong results at 48.7% and 46.2% respectively.
On the surface, this reads as a significant recovery. RPM is more cautious, describing it as partly a low-base effect from the 2022-23 trough and flagging the recovery as fragile and highly sensitive to construction costs, feasibility and funding conditions. A portion of the forecast pipeline, the report warns, may not convert to completions.
The approvals data paints a more concerning picture.
High-density apartment approvals (4+ storeys) fell to 10,506 nationally in the March 2026 quarter - down 10.9% for the quarter and 9.8% annually, and still below the 10-year average of 11,190.
The national decline is largely a NSW story.
For developers tracking feasibility, the new dwelling price index continues to move in one direction.
National new dwelling prices rose 0.88% monthly and 5.56% annually in May 2026 - consistently outpacing general CPI and reflecting persistent construction cost pressures across the industry.
Hobart (9.90%), Adelaide (8.50%) and Brisbane (8.30%) are recording the strongest annual growth, pointing to tighter supply constraints in those markets.
Melbourne (+3.80% y/y) remains the softest result among the major cities.
One of the more significant structural findings in the report is the acceleration of investor activity.
Investor lending grew 25.0% year-on-year nationally in March 2026 - nearly double the pace of owner-occupier lending at 13.9% annually. Investor lending now accounts for the largest share of total lending nationally.
Victoria led investor growth among major states at 29.3% annually, followed closely by Queensland at 29.0%, South Australia at 30.2% and Western Australia at 28.8%. NSW leads investor lending by total value at $12.85 billion.
RPM attributes the acceleration to rental market tightness and yield-seeking behaviour in an elevated rate environment - a structural shift rather than a cyclical blip.
Looking ahead, RPM forecasts other dwellings (apartments and townhomes) to grow 29.6% nationally from the 2022-24 average to the 2025-27 average - the strongest forecast growth of any product type.
Western Australia leads the forecast at 110.5%, followed by the Northern Territory at 84.6%, South Australia at 40.3% and NSW at 30.0%.
The report flags this segment faces the greatest delivery risk of any product type, with feasibility highly sensitive to global construction cost pressures, financing conditions and capital availability, and geopolitical uncertainty impacting materials and delivery timelines.
