Construction of coastal canal estates has increased in recent times in Australia. The lowering of the watertable is required during certain canal construction periods. Coastal low lands contain can contain pyrites and associated potential acid sulfate soils. Dewatering or lowering of the water table to allow for dry excavation, may permit oxidation of the pyritic soil causing acid generation. Saline intrusion may also occur via lowering of the watertable. A paucity of literature on coastal canal estates led to this study, which investigated the subsurface water quality during construction of a canal estate. Groundwater depth, pH, dissolved oxygen, titrated acidity and salinity were monitored on site at the Lake Kawana development in Queensland, Australia. Groundwater monitoring was carried out before, during and after the dewatering program. Data analysis showed that water depth increased during dewatering activities and decreased after re-flooding. The dissolved oxygen, titrated acidity and salinity levels rose during periods of increased groundwater depth, while pH levels fell. The increase in oxygen availability and the associated increase in acidity, may lead to dissolution of heavy metals, but monitoring data was lacking in this regard. Since salinity may increase due to other close by saline surface water bodies, further studies are required to understand subsurface flow patterns during dewatering operations. Computer simulation models could be developed to help determine the flow of contaminants during dewatering and re-flooding operations.