In New South Wales, the annualized rate of approvals for new multi-unit dwellings has dropped to a decade low of 19,843 as of August, marking a 25 percent decline compared to the previous year.

This decline has contributed to a five-year high in the number of new homes approved but not yet started in Sydney, intensifying the city's ongoing housing supply crisis.

The backlog of residential construction is not confined to Sydney; regions outside the city have seen a 47 percent increase in homes approved but not started, totaling 4,972.

As of June, the overall backlog of unstarted dwellings in NSW has risen by 18 percent to over 12,000 homes, despite the region's population continuing to grow.

In Sydney, 45 percent of dwellings are multi-unit housing, significantly higher than Melbourne's 30 percent, highlighting the city's reliance on higher density accommodation.

Analysis by KPMG indicates that approximately 82 percent of these stalled homes are townhouses and apartments, underscoring the challenges in the high-density housing market.

Housing expert Peter Phibbs has characterized the current downturn in Sydney's home-building sector as a 'once-in-50-year trough,' driven by rising interest rates and construction costs.

The number of construction companies facing insolvency in NSW has tripled since 2022, further compounding delays in housing projects.

In response to these challenges, NSW Planning Minister Paul Scully announced that the government is considering a financing guarantee program to support the construction industry.

Scully also mentioned ongoing reforms to the planning system aimed at expediting project initiation and encouraging private sector involvement in addressing the housing crisis.

KPMG urban economist Terry Rawnsley emphasized that financial challenges are particularly severe for high-density developments in Sydney, which are crucial for meeting housing demand.

The Urban Development Institute of Australia has reported that annual apartment starts in NSW are now 72 percent lower than their peak in 2016, reflecting the broader struggles in the housing market.