Any recovery in the building of new homes in Australia during 2011 is likely to stall according to the Housing Industry Association (HIA).

Housing starts are predicted to fall by -3% in 2011, say the HIA, a reversal of the +20% increase that was predicted in 2010. It was anticipated that Australia needed to build over 190,000 homes in 2010 in order to meet underlying demand however current estimates put the figure at 165,940 homes, leaving a 13% shortfall.

According to the HIA, over the next ten years, Australia would need to build 420,000 more homes than were built over the last decade.

Harley Dale, the chief economist at HIA, said: “A failure to build sufficient homes is placing huge pressure on rental markets and is making it very difficult for younger Australians who aspire to home-ownership to achieve their goal.

“If the current recovery in building new homes peters out as soon as the positive impact from past stimulus has gone, then the pressure on renters and the wider entry-level market will intensify further.”

Activity in the housing-renovations sector meanwhile is set to continue at increased levels due to strong conditions in the job-market and ongoing increases in house prices.