A recovery in the housing sector is expected in the second half of 2009, thanks to low interest rates and government stimulus spending, a peak industry group says.

The Housing Industry Association’s (HIA) quarterly National Outlook forecasts new home starts will fall by 17 per cent to a total of 132,000 for the year to June 30.

However, the report, released on Thursday, predicts a rise of 11 per cent in housing starts for the following 12 months.

The HIA expected 129,500 dwellings to be completed in fiscal 2009 compared with 141,100 in 2008 and says it will take until 2011 before the 2008 level is reached again.

HIA chief economist Harley Dale said nation building efforts by the federal government, coupled with low mortgage rates, would lead the resurgence in housing.

Dr Dale said the recovery would be heavily constrained by economic uncertainty and rising unemployment even though demand would continue to outstrip supply by more than 50,000 homes a year until at least 2011.

“Even in the absence of the current troubled economic times, the perennial obstacles of inadequate land supply, insufficient skilled labour, and excessive taxation of new housing remain far from resolved,” he said.

Dr Dale said renovations would continue to underpin the housing industry, accounting for 47 cents in every dollar spent in the market.

“Renovation activity hit a record worth of nearly $31 billion in 2007/08 and our forecast is for the value to be well on the way to $33 billion in 2010/11,” Dr Dale said.

On Wednesday, the Australian Bureau of Statistics (ABS) announced that the value of construction work for the first three months of the calender year posted its biggest fall in almost nine years.

Total construction work fell 3.7 per cent in the March quarter, to a seasonally adjusted $35.47 billion, the ABS.

AAP