Building approvals raise the supply, lowering prices in the process.

The housing industry closed the 2017/2018 financial year with a bang in terms of the number of building approvals, figures from the statistics bureau revealed.

At the end of June, building approvals recorded a 1.6% annual growth, making the latest financial year the third highest year on record for building approvals.

Housing Industry Association principal economist Tim Reardon said the growth in the number of new homes is one of the major reasons why price increases have eased over the past year.

"The affordability challenge can only be addressed by allowing the industry to grow to meet the demand for new housing. This includes making more residential land available and reducing the taxation burden on new housing," Reardon said.

Victoria was the largest driver, recording a 16% growth in building performance over the recently-concluded financial year.

"These strong conditions in Victoria are likely to moderate over the remainder of 2018 as the population growth rate slows and the pent-up demand for new housing in Victoria is met," he said.

It was also a strong year for South Australia as approvals in the state rose 11.1%. In New South Wales, building approvals declined by 2% during the year.

"This result is consistent with other indicators showing that the market in NSW peaked toward the end of 2017," Reardon said.

The biggest slumps in annual approvals were recorded in Western Australia (-9.2%) and Northern Territory (-25.8%).

"Encouragingly, both of these markets have seen growth in recent months and hopefully, this is a sign that they have passed the worst of their downturns," Reardon said.