Strong population growth and low interest rates are likely to fuel a construction boom in some regional areas over the next two years, a report has found.

The Regional Building report by BIS Shrapnel shows regional parts of New South Wales, the Northern Territory and Western Australia are likely to see construction activity soar by around 50 per cent.

Kim Hawtry from BIS Shrapnel says coastal areas in particular are set to boom.

"These regions on the coast of NSW saw a drop-off in building and that was an experience shared with many similar destinations across the country," Dr Hawtry said.

"But as a result of that we now find that there's an under-supply of homes. Our report finds that growth will return in these regions."

Dr Hawtry says it is unclear whether the surge in home building in areas like Coffs Harbour and Grafton in New South Wales, and the Goldfields and Wheatbelt in Western Australia, will be enough to offset a dramatic decline expected in other areas.

"There are a number of positive signals developing in the economy and in the housing market," he said.

"But so far it hasn't come together to create a convincing story that there's a fully fledged deep-seated housing recovery underway."

The report suggests there will be a construction slump in mining towns as mining investment cools.

Resource-rich regions like the Pilbara and Kimberly in Western Australia and Mackay in Queensland are expected to be the be the worst-affected.

"We expect the Pilbara to drop off by 36 per cent and the Kimberly to see home building drop by 22 per cent in the next year," Dr Hawtry said.

"So they're pretty dramatic, they're going to affect the industry, because they're coming off astronomical levels from the mining boom."

Builders in Australia's south-east are also predicted to see a sharp drop in new buildings.

The decline in manufacturing in particular has placed the local government areas of Geelong, Hume and Greater Melbourne in the reports bottom 20, for dwelling commencements in next financial year.

The Australian Capital Territory's construction industry is expected to feel the effects if there is a change of government in this year's federal election.

"The ACT will suffer from public sector cutback and see a dramatic 32 per cent reduction in dwelling commencements."