The Housing Industry Association's quarterly National Outlook Report suggests Australia's building recovery will stall in 2011.
The report expects there will be a new home building recovery in the second half of this year that will run of out of steam by mid next year.
Housing starts are forecast to increase by 20 per cent in 2010 to a level of 165,940, before falling back by 3 per cent in 2011.
On a financial year basis, the number of housing starts is forecast to increase by 22 per cent in 2009-10 and 2 per cent in 2010-11 to reach a level of 162,600. Starts are forecast to be flat in 2011-12.
However HIA chief economist, Harley Dale said it's not too late to turn the situation around through policies targeted at new home building combined with more rapid progress in reducing structural supply side barriers.
"The empirical data, observations on the ground, and the slow progress in reducing supply side obstacles all currently point to the first increase in housing starts in eight years in 2010 reverting back to a decline in starts in 2011," Mr Dale said.
"Meanwhile the renovations sector is looking healthier with three consecutive quarters of growth through to March this year. Total renovations hit a new quarterly record in March 2010," said Mr Dale.
"Improving labour market conditions and existing home price gains are forecast to see the total worth of the renovations sector increase by 7 per cent in 2009-10. Growth of 4 per cent is forecast in each of the subsequent two years, taking renovations activity to a worth of $36.4 billion in 2011-12."
"The recovery in the renovations sector includes signs of growth in major alterations and additions which encompasses structural extensions, an important component of the overall housing industry," he added.
