"Despite more negative flags than you'd see in a cardiac risk assessment on President Trump, we still expect a pretty benign construction cycle.

"That benign nature owes much to what we don't see in the next couple of years. We don't see China falling over and Australian unemployment jumping. And we don't see global and local interest rates rising fast.

Uptick in commercial construction

"That still sees the current downswing bottoming out in late 2019 but, thanks to continuing population gains, bottoming at levels that are solid compared with the depths plumbed in past cycles."

But until the downturn stops, the rate of housing construction and renovation will ease over the next couple of years, only offset by an uptick in commercial construction of offices and hotels.

Strength in Australia's tourism sector, particularly from overseas visitors, has driven increased investments in hotel accommodation such as the $2.2 billion Crown Sydney Hotel Resort in Barangaroo.

But while most of the commercial construction lies in NSW, it will still bear the brunt of the housing downturn because it has had the biggest rise in house prices among capital cities.

Expensive homes will struggle to sell but there will be "less damage at the lower end", which benefits from first home buyer concessions, the report says.


Queensland defies the curse of oversupply

Like Sydney, Melbourne's housing market will also weaken, but not to the extent as Sydney.

The scales will tip in favour of Queensland, which has defied the curse of an oversupply of dwellings, with more people migrating interstate to the sunshine state from Sydney.

"All that suggests better times ahead for housing construction in Queensland," the report says.

"Housing approvals have turned a corner and building commencements look to have bottomed out. While the overall pace of housing construction will still likely subtract from the state's growth over the next year, it will likely start adding to growth from then on as strong population growth soaks up the current excess supply."

Perth is still in the doldrums and the ACT has room for more supply, but any further growth in population and housing needs to be supported by better infrastructure nationally, without which population growth is bound to be cut, the report warns.

"The nation's immigration intake will be cut – perhaps severely – thereby undercutting many of the 'most likely' forecasts underpinning the growth of domestic markets," the report says.

Population growth is the bedrock of a slowing but steady housing market.