The value of construction work completed across the country fell in the final months of 2022, although a backlog of COVID-induced building work is still flowing through.
The activity generated a total of $55.3 billion in the December quarter, down 0.4 per cent from the previous three months.
Residential building activity lifted 0.9 per cent in the quarter to $18.4 billion but sunk 1.8 per cent on an annual basis.
Non-residential building work fell 5.1 per cent in the quarter after a strong September quarter, and engineering activity picked up by one per cent on a quarterly basis.
The Australian Bureau of Statistics data will feed into the national accounts for the December quarter due next Wednesday.
BIS Oxford Economics head of global forecasting Nicholas Fearnley said the residential building work figures highlighted the backlog of home-building work which will keep the industry busy for some time to come.
The pandemic drove an uptick in demand for single family homes that are yet to be completed, which will support construction activity for some time despite building costs, delays and credit availability easing demand for new dwellings, he added.
"This isn't expected to materially affect the work done numbers until the back end of 2024 and 2025," he said.
For renters, an expected slowdown in residential construction triggered by higher interest rates is tipped to reduce the supply of new rental properties and drive up rents.
Analysis by St George Bank economists Pat Bustamante and Jameson Coombs shows advertised rents have much further to rise and could lift by another 11.5 per cent in 2023.
Advertised rents surged by 10 per cent in 2022, with that figure expected to feed through to existing rents with a lag as leases expire.
"We expect rents to increase on average by up to 7.5 per cent in 2023, on top of the four per cent recorded in 2022," Mr Bustamante and Mr Coombs said.
Renters are in a precarious position in this interest rate hiking cycle as housing costs for this group are at near record highs.
"This share was around five percentage points higher than for households with mortgages - they, therefore, have less capacity to deal with higher prices," they said.
The economists said higher interest rates impact rents by reducing new home construction and increasing the minimum return amount investors need to invest.
And while they expect higher rents to entice investors into the market, the economists expect this will occur in pockets and towards the back half of 2023.
The expected influx of migrants and international students is also expected to put pressure on the already-stretched rental supply.
