It was announced this week that Prime Minister, Treasurer and Housing Minister were developing a plan to activity within the sector amid a decline in migration and the Reserve Bank's prediction that housing investment was expected to drop by 17 per cent by the end of June.

There has been speculation that any rescue package could contain substantial grants to entice new home buyers towards new builds.

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Real Estate Institute of Australia president Adrian Kelly said assistance measures for the purchase of new dwellings could impact on buyer choice and market activity.

"Less than 20 per cent of Australian first home buyers prefer to buy new homes," he said.

"These choices are made on affordability of older dwellings in locations that provide proximity to work, leisure activities and infrastructure including public transport."

Mr Kelly said many agents had reported a 50-per-cent reduction in listings and enquiry level from prospective sellers.

He said this could worsen if there was discrimination with assistance to new homes and established homes.

Housing Industry Association state executive director Stuart Collins said the residential construction industry was predicted to contract by around 40 per cent by the end of the next financial year without a stimulus package.

"The reality is that it is the home building industry, which has led economic recovery from most post-war downturns and with the appropriate approach, can again play a significant role in supporting the Australian and the Tasmanian economies," he said.

"The multiplier effect is understood by government and for these reason new housing should take priority over established."

Mr Collins said it would be many years before there was a sign of recovery if the residential construction industry suffered a major downturn due to a protracted lead-in time for building.

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