Approvals for the construction of new homes jumped in January on the back of a strong recovery in high-rise construction that economists expect will keep pressure on home prices.
The 17.1 per cent jump in approvals easily outpaced the five per cent increase the market was expecting.
Approvals in the volatile 'other dwellings' category - including apartment blocks, jumped 42.2 per cent in January, after retreating by almost 40 per cent in December.
AMP Capital Senior Economist Diana Mousina said the volatile activity was driven by a one-off, 30.2 per cent jump in approvals for apartment blocks by local councils, meaning that new home construction growth will remain positive.
"Which is good news for GDP growth in the near-term," Ms Mousina said
The ongoing line of supply will also put pressure on home prices - something already apparent in Sydney - Ms Mousina said.
"We expect apartment prices in Sydney and Melbourne to decline by five to 10 per cent this year as new supply continues to enter the market, sentiment towards the housing market continues to soften and affordability pressures in the two capital cities affects demand," she said.
Over the year to January, total building approvals lifted 12 per cent, the Australian Bureau of Statistics said on Monday.
Approvals for private sector houses fell 1.1 per cent in January.
St George senior economist Janu Chan said residential construction will remain buoyant until mid-2019.
"However, a moderation in house price growth is expected to flow through to a broader weakening in housing conditions, including residential construction," Ms Chan said
High household debt, low wages and regulatory changes aimed at investors are expected to continue influencing property demand.
"Nonetheless, ongoing strong population growth and the solid labour market should mitigate the cyclical downturn in the housing market," Ms Chan said.
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