The construction of apartments in the major Australian cities will slow down heavily in 2017 and 2018 as the apartment industry heads into a correction, according to a report by IBISWorld.

After high level of construction activity since the late 2000s, with multi-unit residential commencements rising by 6.8 per cent a year over the five years to 2016-17, developers - particularly in Melbourne and Brisbane - are now holding back developments and delaying project starts due to an oversupply of products.

Developers and owners of projects have "started slashing prices of apartments", according to the Multi-Unit Apartment and Townhouse Construction in Australia report.

Construction and price of apartments will correct in 2017/18, IBISWorld says.

"The robust demand behind this surge in apartment and townhouse construction activity was driven by Australia's strong population growth, a shift in housing preferences towards high-density living and an inflow of foreign investment in the local property market," IBISWorld said in the report.

"However, the industry has moved into a sharp cyclical correction in the current year, stemming from the recent completion of several large-scale developments and the accumulation of unsold and unleased apartments."