Recent interest rate rises have not reduced building starts in Australia, according to research firm BIS Shrapnel.
"Rates are rising but we don't think it will have a depressing effect on either residential or commercial development. This is unprecedented," BIS Shrapnel's senior economist Jason Anderson said.
This was particularly true in NSW, which was suffering from chronic housing shortages. NSW was also seeing a resurgence in commercial projects.
In its latest forecast, BIS Shrapnel says total building commencements will rise by 8 per cent in the 2008-09 financial year, totalling almost $18 billion in NSW, compared with a 2 per cent increase in the current year.
Mr Anderson said that traditionally, the Reserve Bank lifted interest rates to cool housing activities, but in this cycle building commencements in both the residential and non-residential sectors would continue to rise.
He said the gap between housing demand and supply in NSW was the widest in 50 years.
Developers continued to position themselves to increase the number of housing starts, he said.
Mr Anderson said Queensland and Western Australia would continue to power ahead.
Activity in Queensland is almost as high as in NSW. Western Australia is running at around half the level of Queensland.
"Three years ago, the level of activity in Queensland would have been half of that in NSW, while Western Australia would be just 10 to 20 per cent of the size of the NSW market," Mr Anderson said.
He said Brisbane and Perth were not in danger of oversupply in the next two years.
But the momentum in Victoria had petered out, with concerns about possible over-supply.
Nationwide, BIS Shrapnel forecasts a 3 per cent rise in the value of building starts in 2007-08, with marginal increases across residential and non residential sectors.
