Less Building May Lift House Prices

House prices are cooling in some sectors of the Sydney and Melbourne market, but could rise again as the pace of new home building slows, according to a new report.

The housing affordability report, from researcher CoreLogic and community housing body PowerHousing Australia, finds prices have been trending lower in some capital cities as building has hit record levels, with 221,000 dwellings built in the past year.

But the rate of construction is expected to slow down, with the number of new homes built set to fall by up to 50,000 each year. That would mean 20,000 fewer new homes each year than the 195,000 needed to meet future demand and such a downturn could push prices up.

PowerHousing Australia chair Nicola Lemon says more must be done to tackle the shortage of affordable housing. "A concerted effort is needed by all levels of government to help first home buyers, key workers and moderate income earners find housing solutions," she says.