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a lag. but the strong inward migration turned to outward migration once the resources cycle turned and incomes declined too. housing construction continued past the turn in the cycle, contributing to the price dynamics that i will come to shortly. one reason for highlighting the differences in construction cycles between the east and the west coast is to illustrate the point that these differences occurred across the country despite the same interest rate prevailing. this means that it is not just interest rates that matter for housing. other fundamentals such as population growth, incomes and lags on the supply side were important drivers of the construction and price cycles. that said, interest rates cost of finance is an important consideration. do play an important role ; the residential construction grew from 2012 to be 6 per cent of gdp at the beginning of 2016 and stayed around there for the next three years. this was its highest share of the economy since 2006. while the supply response to the increase in population growth in the mid 2000s took some time, in the end it did come. the increase in supply has worked to address the increased demand. hence it is not surprising to the see construction activity decline, particularly when it is combined with a decline in demand from foreigners, as well as from domestic investors in a market where prices were falling and facing tighter credit conditions. since september 2018, residential construction activity has declined by 9 per cent. the decline has been broad - based across detached and higher - density housing, as well as spending on renovations ( alterations and additions in national accounts terminology ). nevertheless, the pipeline of work to be done remains at a high level, particularly for higher - density projects in new south wales and victoria, though it has declined in most states ( graph 2 ). https : / / www. rba. gov. au / speeches / 2019 / sp - dg - 2019 - 10 - 17. html 3 / 17 10 / 17 / 2019 housing and the economy | speeches | rba graph 2 given the large size of the pipeline, we had expected construction activity to remain at a pretty high level for most of this year, but it turned down sooner and by more than we had expected. the fall has been larger in higher - density than in detached, but still sizeable in each. even so, much of the downturn in construction activity is still ahead. building approvals are around 40 per cent lower than their peak in late 2017 ( graph 3 ). https : / / www. rba. gov. au / speeches