Skilled labour in the residential building industry remained in moderate surplus for the last three months of 2011, in a soft building market, according to an industry study.

The Housing Industry Association (HIA) trades report, released on Friday, showed a trend of modest over-supply in the December quarter.

The HIA trade availability index was at +0.04 in the December quarter, following a reading of +0.06 in the September quarter, suggesting that slight over-supply was still an issue, but was moderating.

The index has now shown a surplus reading for three consecutive quarters.

Six of the 13 housing trades were moderately over-supplied in the December quarter, while one was in equilibrium, and the remaining six were under-supplied.

HIA chief economist Harley Dale said the overall surplus trend was not unexpected, given the lack of demand in a weakened housing market.

“Last year there was a deterioration in new home building, while the renovations market flattened out,” he said.

“In this environment, which was partly driven by weak demand conditions, it is not surprising that some of the pressure on the availability of skilled labour was temporarily reduced.”

However, Dr Dale warned that a structural labour shortage could hinder recovery in the housing sector.

“Now, during softer housing conditions, is precisely the time to be accelerating policy solutions to address this structural labour shortage,” he said.

The HIA trade prices index eased by 0.7 per cent over the December quarter, to be down by 0.4 per cent over the year.