Victoria's homebuilding activity is poised to fall to its lowest level since the financial year 2013-2014, according to the latest forecast from the Housing Industry Association (HIA).

The forecast points to a 10.4% fall in the number of detached homes commencing transaction over the next two years, primarily due to the extended shutdown period in the state amid the COVID-19 outbreak.

"Victorians have not been able to fully capitalise on HomeBuilder to the same extent as other jurisdictions due to the state’s prolonged second lockdown restricting access to display centres," said Fiona Nield, executive director at the HIA.

The outlook for the multi-unit market is also poor, with starts for the segment predicted to decline by 42.4%. The loss of student and tourist demand and the move of Melbournians to regional Victoria will dampen the activity in the multi-unit market.

Overall, the total starts in the state will be down by 22.7% over the next financial year.

"The Victorian economy has been underpinned by very strong population growth over the past decade which has seen ongoing growth in employment in the residential building sector," Nield said. 

Nield said the volume of new homes commencing construction could further decline by 2022 if population growth does not return to normal levels.

However, despite these weak forecast for new housing builds, the renovation segment is expected to feel the positive impacts of the HomeBuilder scheme.

"There also appears to be a solid outlook for the renovations market in Victoria with households switching their expenditure from travel to home renovations. This trend has been seen across the country and we expect a 6.7% increase in renovations activity," Nield said.