Construction activity in units, flats, apartments and townhouses around Australia is expected to drop right away as the boom in home building activity subsides over the next two years, the latest report suggests.

In its latest forecast, Housing Industry Association says it expects the overall number of commencements of non-detached dwellings to drop by 40.1 percent over the next two years to go from an expected record of 117,360 starts in calendar 2016 to just 70,210 by calendar 2018.

Victoria and Queensland will be hardest hit as starts drop by 46.3 percent and 45.9 percent respectively.

New South Wales, Australian Capital Territory, Western Australia and South Australia will also be badly impacted as commencements fall by 37.7 percent, 34.7 percent, 23.3 percent and 20.9 percent respectively.

Tasmania is the only state expecting an increase in starts rebound from what is expected to be a horrible eleven year low of just 320 commencements this year.

Detached house around the nation starts are also expected to drop by 10.1 percent over the next two years after coming off an elevated base of 114,610.

HIA Acting Chief Economist Warwick Temby said home building activity especially in the multi-residential sector was easing back to more regular levels after an unprecedented boom in new home building over the past two years had eaten into a previous housing shortage which had built up over the previous decade.

“The recent peak in new home building was unprecedented: an all-time record 229,823 new residential dwellings started building in 2015/16 …” Temby said.

“Multi-unit building, especially apartments in the Eastern States, has driven much of the growth in this cycle and is also forecast to lead the slowdown in new activity over the next couple of years.”

According to Temby, HIA is still forecasting a measured return to normal levels of home building activity notwithstanding uncertainty about the broader economic outlook and future US policy settings in the wake of the election of Donald Trump.

He says that actual building on the ground will not decline in the same way as new housing starts as much of the substantial work in the current pipeline will not be completed until 2018 or early 2019.

The latest forecasts follow the release of ACIF forecasts which suggest that the overall level of construction employment would fall for each of the next five years as resource sector work continues to fall back and home building activity starts to fall away.