Australian building approvals fell 0.1 per cent to 12,126 units in August, seasonally adjusted, the ABS said.
The August result was the first monthly decline since May and worse than market expectations of a 2.5 per cent increase.
In the year to August, building approvals were flat.
J.P. Morgan chief economist Stephen Walters said the figures were "no disaster".
"They were a little bit softer than expectations, but all of it was to do with the high-density dwellings," Mr Walters said.
"In terms of the broader housing market, the single dwellings, they were pretty good."
The weak August report was due to a sharp decline in the "private sector other dwellings" category, which backpedalled 11.7 per cent in the month.
The category includes apartments and other multi-unit dwellings, had risen by 34.5 per cent and 28.9 per cent, respectively, over the previous two months and was regarded as a volatile sector.
Private sector dwelling approvals rose 3.1 per cent in August, having posted monthly rises through 2009.
Mr Walters said he expected some softness in building approvals after the federal government's temporary boost to the first home owner grant was pared back, but it would be a "gradual slowing".
"The expanded grant is still there, even in scale-back form, for another three months," Mr Walters said.
Since October last year, eligible first home buyers have received $14,000 for buying an existing home or $21,000 for buying a new home or building their own home.
The grant will be reduced to $10,500 and $14,000 respectively, between October 1 and December 31.
Mr Walters said there was still a "big incentive" for potential first home buyers to enter the market now.
"Prices will fall after the grant gets scaled back in January, but at the moment there is still a pretty big incentive with interest rates pretty low and that's what first home buyers are doing," Mr Walters said.
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