Housing construction in Australia to fall further

BIS Shrapnel says it expects that the number of new homes built in 2006-2007 will fall 3 per cent compared to last year.

Construction levels are expected to remain stagnant next year due to poor housing affordability and rising interest rates.

BIS spokesman Jason Anderson says there is huge disparity between the states.

"That strength is really still in markets like Queensland and Western Australia, which by historical standards, are running at fairly solid levels," he said.

"We think the West Australian market's in for quite an extended downturn," he said.

"Having said that, it's coming back from a very high level."

Mr Anderson says New South Wales is running close to a 50-year low in terms of dwelling commencements.

He says housing affordability in Sydney is still a big problem.

"That's really choked off demand for new free-standing houses," he said.

"When you combine that with the fact that residential property prices have actually fallen about 10, 15 per cent over the last two years, that's led to a very substantial decline in investor finance construction." - Copyright ABC Australia