Building approvals are coming off record highs but remain strong enough to meet demand, provided there are no drastic falls.
Property Council Executive Director Residential Nick Proud said the ABS figures for August show building approvals are moderating and while they bear close monitoring are not yet cause for alarm.
"Building approvals remain sufficient to meet demand for new housing despite the recent moderation in activity levels," Mr Proud said.
"But this is no cause for complacency. It is only in the last year that we've started eating into the housing supply backlog and the economy is increasingly reliant on the jobs and economic activity from housing construction.
"For the 12 months to August 2015 we are still at a record high 226,415 building approvals seasonally adjusted, compared to 200,269 for the 12 months to August 2014.
"Looking at the month to month figures there is clearly a downward trend emerging. August has seen a fall in building approvals to 18,701 from 20,215 in March this year.
"The 28 per cent month on month drop in key growth markets like Sydney warrants particular attention. Largely this monthly drop comes from an overall 11.4 per cent drop in multi residential approvals activity which includes apartments.
"We expect this trend to continue as activity levels come off the peak and back to more normal long term averages.
"It's certainly not time to panic as building approvals are still in a range to meet new housing supply but we also need to avoid any return to a period of underbuilding.
"The spike in home prices of recent times were caused by a decade of not building enough new homes to meet demand. That's a situation we don't want to see repeated.
"Policies to maintain a steady, sustainable pipeline of new housing are imperative.
"Governments certainly can't afford to take their eye off the ball at this stage in the cycle and it has been encouraging to see the renewed focus, particularly from the Federal Government, on sensible measures to address long term supply, planning and housing affordability issues.
