Between 2015 and 2019, Australia’s capital cities experienced a massive apartment construction boom. Cranes dominated the skylines of Melbourne’s Southbank, Sydney’s Olympic Park, and Brisbane’s inner city. When those apartments settled, many were worth less than their off-the-plan purchase price. Vacancy rates in some buildings hit double digits. Overseas investors who’d bought sight-unseen discovered their “premium city living” was a 42-square-metre box next to a construction site.

That period left scars. Investors got burned, lenders tightened their criteria, and apartment values in some precincts took five years to recover.

Now, building approval data is ticking upward again. Is history about to repeat? I don’t think so - but the risks aren’t zero, and they’re concentrated in specific locations.

The Numbers

ABS building approval data for the 12 months to January 2026 shows apartment approvals in capital cities running at approximately 58,000 units nationally. That’s up from a low of about 39,000 in 2022, but still well below the peak of roughly 82,000 in 2016.

In Melbourne, apartment approvals are climbing in inner suburbs like Southbank, Docklands, Fishermans Bend, and Box Hill. Sydney is seeing increased activity in Parramatta, Zetland, and the Waterloo precinct. Brisbane’s Woolloongabba and South Brisbane corridors are active ahead of the Olympics.

The pipeline matters because apartments take 2-3 years from approval to completion. What’s approved today settles in 2028-2029. If you’re buying now, you’re buying into a market where competition from new stock will increase over the next few years.

Why This Cycle Is Different

Several factors make this cycle structurally different from 2015-2019.

Population growth is stronger. Australia’s net overseas migration hit record levels in 2023-24 and remains elevated. The Centre for Population projects annual net migration of around 260,000-300,000 through 2028. More people need places to live, and many migrants start in inner-city rental apartments. This absorbs stock that would otherwise sit vacant.

Construction costs have risen dramatically. Building an apartment tower today costs 25-35% more than it did in 2018, due to higher material costs, labour shortages, and increased regulatory requirements. This means fewer marginal projects get built. The economics simply don’t work for lower-quality developments in secondary locations. The projects that do proceed tend to be in stronger markets with higher end values.

Lending standards are tighter. During the 2015-2019 boom, off-the-plan buyers could secure pre-approvals with minimal documentation, and many overseas buyers purchased with little scrutiny. Post-royal commission lending standards mean buyers need genuine savings, verified income, and realistic valuations. This filters out speculative demand.

Interest rate exposure. With the cash rate having peaked and now beginning to ease, there’s less risk of a rate-driven settlement failure wave like the one that hit in 2018-2019 when buyers who’d purchased at low rates couldn’t settle as their costs increased.

The Pockets to Watch

Not all apartment markets carry equal risk. The concern is concentrated in a few specific areas.

Melbourne’s Fishermans Bend has an enormous development pipeline relative to existing demand. The precinct is still in its early stages, with limited public transport, few retail amenities, and a reputation problem from early low-quality developments. If even half the approved projects proceed, absorption will be slow.

Sydney’s Waterloo has a massive state government redevelopment underway that will add thousands of apartments over the next decade. The first stages are manageable, but the sheer scale of what’s planned could weigh on prices if delivery outpaces demand.

Brisbane’s inner south is receiving concentrated development ahead of the 2032 Olympics. Olympic infrastructure will eventually improve the area, but there’s a risk of apartments completing before the transport and amenity improvements arrive.

I’d be cautious about buying in any of these precincts at current prices without a clear understanding of what’s coming in the surrounding blocks over the next five years.

Where the Risk Is Lower

Established inner-city precincts with limited development sites carry much less oversupply risk. You can’t build new towers in Melbourne’s Fitzroy or Sydney’s Surry Hills because there’s nowhere to put them. Supply constraints protect existing values.

Owner-occupier-dominated apartment markets are also safer than investor-heavy buildings. A building full of owner-occupiers doesn’t flood the rental market when conditions tighten. A building that’s 80% investor-owned can see listings spike when multiple investors decide to sell simultaneously.

One way some AI strategy firms are helping property analysts is by modelling settlement risk across building pipelines - running scenarios on how many approved projects will actually proceed to construction given current cost and financing conditions. The data suggests that roughly 25-30% of currently approved apartment projects won’t proceed due to cost escalation and financing challenges. That’s a meaningful reduction in the effective pipeline.

What I’d Tell an Investor

If you’re considering an inner-city apartment investment in 2026, here’s what I’d focus on:

Check the development pipeline within a one-kilometre radius of the property. How many apartments are approved, under construction, or recently completed? If the number is large relative to existing stock, be cautious.

Prioritise buildings with high owner-occupier ratios. They’re more stable, better maintained, and less exposed to rental market cycles.

Avoid precincts where amenity hasn’t caught up with density. Having a new apartment in a construction zone with no cafe, no park, and no supermarket isn’t urban living. It’s camping with better plumbing.

Look at the builder. The construction sector is still seeing insolvencies at an elevated rate. Buying off-the-plan from an undercapitalised builder is a genuine risk.

The apartment market isn’t heading for a 2017-style oversupply crash nationally. But in specific precincts, the maths warrants careful attention. Do your homework street by street, not suburb by suburb.