The housing recovery is expected to come to a halt over the next 12 months, the Housing Industry Association's (HIA) latest report has shown.
According to the HIA's quarterly National Outlook Report, the healthy first stage new home building recovery is likely to run out of steam by mid next year.
HIA chief economist Dr Harley Dale said empirical data, observations on the ground, and the slow progress in reducing obstacles to supply all currently point to the first increase in housing this year reverting back to a decline in starts in 2011.
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, according to the report.
HIA predicts that the number of housing starts will increase by 22 per cent in the 2009/10 financial year and then by a lowly 2 per cent in the 2010/11 financial year to reach a level of 162,600.
"It is 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," Dr Dale said.
"Australia needs to build over 190,000 dwellings in 2010 alone to meet underlying demand and over the next ten years we need to build 420,000 dwellings more than we built over the last decade."