After dropping for four consecutive quarters, the much needed recovery in housing construction appears to be finally underway, thanks to the federal government's first homebuyer assistance and the decade-low interest rates.

According to the latest figures from the Australian Bureau of Statistics, housing starts surged by 9.4% in the September quarter. Detached house starts rose by 8.4%, while construction of other dwellings including units and townhouses climbed by 13.1% compared to the previous quarter.

The Housing Industry Association (HIA) is forecasting housing commencements to continue to improve over this financial year with growth of at least 9% expected in 2009/10.
Commsec is also upbeat about the outlook for new home construction despite fears of further rate rises in the next 12months.

"The buoyant trend in home building should continue into the New Year," said Craig James, chief economist with Commsec. "In fact the latest housing finance data has shown that home construction is set to soar over the coming year. Loans to build new homes hit 15 year highs in October as first home buyers rushed the government grant. The lift in construction is great news for builders and the economy as a whole. While it is early days it is encouraging to see the considerable pickup in apartment construction."

However, while the new construction over the coming year will partly address Australia's housing under-supply problem, more homes will need to be built to house the growing population according to Ben Phillips, senior economist with HIA
 "Even allowing for the emergence of a new home building recovery, housing starts are still only running at an annualised level of 136,328. That is substantially below the level required to meet the demands of a rapidly growing population. Of particular concern is that Australia's fastest growing states, Queensland and Western Australia, are yet to see a housing recovery," he said.