The Housing Industry Association (HIA) said new dwelling commencements would reach 180,000 in 2014, which would make it the second-highest level on record.
That would represent 7.1 per cent year-on-year growth, although it would be less than the 10.9 per cent growth recorded in 2013.
Commencements will decline in 2015 and 2016 to a level just under 170,000, according to the association.
HIA chief economist Harley Dale said residential construction investment would boost demand across the manufacturing, retail, and supply and distribution sectors.
“Residential construction is making a vital contribution to the rebalancing of growth in the nation’s economy,” he said.
Meanwhile, the association has predicted a renovations expansion after activity fell to a 10-year low last year.
Renovations are forecast to grow by one per cent in the 2013/2014 financial year, followed by growth in the next three financial years of 1.2 per cent, 2.3 per cent and 2.5 per cent.