Commonwealth Securities chief equities economist Craig James said buyers had fled the property market because of high interest rates.
"With population growing at the fastest rate in 18 years, we simply should be building more homes, not less," he said.
"Interest rate hikes have spooked investors and budding owner-occupiers.
"Investors are putting their money in the bank and people are staying in the rental market longer. But the situation is unsustainable."
Mr James said rents and house prices would be forced up because of the tight conditions, which would eventually attract more investors and lead to more building.
"The latest slump in new dwelling approvals is clearly bad news for those renting," he said.
