Australia continues to run large annual deficits between the underlying demand for dwellings and the completion of dwellings, according to HIA.
HIA's updated projections of the underlying demand for housing suggest that Australia built 22,000 too few dwellings in 2009/10, with a projected deficit of 16,800 dwellings in 2010/11 and 21,000 dwellings in 2011/12.
"In the longer term Australia's housing market is underpinned by the immutable forces of insufficient supply and robust underlying demand," HIA chief Andrew Harvey said.
Looking forward, Mr Harvey said supply-side factors such as the increasing scarcity of land in the main urban centres in Australia will continue to play a major role in driving Australia's housing prices.
"We need to be clear that supply side obstacles which prevent housing construction from keeping pace with the rate of household formation will see Australian burdened with a growing under-supply of housing and a resultant worsening affordability problem," said Mr Harvey.
"Governments at all levels need to increase their efforts to address these supply side issues as a matter of urgency," he said.