Recently released figures have shown Australian building approvals rose a strong 5.9% in November giving weight to a constructiuon boom that will increasingly foster growth...

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Approvals for apartment blocks, a typically volatile sector that suffered during the crisis when funding dried up, led the way in November with a whopping 32 percent jump. That lifted total building approvals by a third from November last year, the biggest rise in 7-1/2-years.

"Construction activity will be very buoyant in 2010, ensuring solid activity levels for firms in building material, construction and engineering sectors," said Craig James, an economist at the Commonwealth Bank.
 
Analysts at Commonwealth Bank say the construction boom could last two to three years and add 2-3 percentage points to economic growth. Fundamentals back the case for higher home prices. Immigration is at a record and the population is growing at its fastest in 40 years. These come at a time when house supply is tight, with construction languishing below historical averages.

"Building levels remain lower than the long term average and are not meeting runaway population growth," said Alex Joiner, an analyst at ANZ. "This means the tightness in the housing market will continue."