Australia’s interest rates will probably start to fall early next year, if not before.

And when that happens, house prices could explode.

There are at least two reasons why that is likely.

The first is that many familes, who cannot afford to buy a house, with interest rates at their present level, might be able to buy, if rates fall.

The second is that home building activity this year has fallen well short of potential demand, both from natural population increase and the number of new migrants coming to Australia.

And figures released yesterday show that situation is getting worse.

The Statistician reported that, in trend terms, home building approvals fell in June, for the seventh consecutive month.

The chief economist of the Housing Industry Association, Harley Dale, said approvals for detached houses had fallen 2.4 per cent in the first six months of this year.

“For the multi-unit sector, the decline was a sharper 13.3 per cent,” Mr Dale said.

He said home building approvals are now at their lowest level since the end of 2006.

But high interest rates aren’t the only problem.

Mr Dale said the situation had been made worse by draconian legislation, ridiculous tax grabs and restrictive land release programs.