Dwelling starts have fallen to their lowest level in two years in another sign that the property market remains flat.

Dwelling commencements in the September quarter fell 6.8 per cent from the June quarter to 35,672 units, seasonally adjusted, the Australian Bureau of Statistics (ABS) said on Tuesday. In the year to September 2011, total dwelling commencements dropped 11.5 per cent, seasonally adjusted.

It was the fourth fall in the series in five quarters, bringing the total number of dwellings commenced to their lowest level since the September quarter of 2009.

CommSec economist Savanth Sebastian said the data painted a picture of a housing sector that was “going nowhere”.

“Activity levels have dried up, with potential home buyers remaining on the sidelines,” Mr Sebastian said.

Recent interest rate cuts by the Reserve Bank of Australia should provide a catalyst for a modest improvement in building activity, he said.

The cash rate is now at 4.25 per cent after two consecutive 25-basis point cuts in November and December.

“Given the significant impact that housing has on an array of other sectors, a resurgence in housing activity will be needed to support broader economic growth over the coming year,” Mr Sebastian said.

Recent data, including the national accounts figures for the September quarter, released last week, have highlighted the weakness of the housing sector.

On Monday, the ABS said total housing finance by value fell 2.5 per cent in October, seasonally adjusted, to $20.458 billion. The ABS data also showed that the value of home loans was largely unchanged from October 2010, when it was reported at $20.593 billion.

In separate ABS data on Tuesday, housing finance for owner occupation fell 1.2 per cent to $14.377 billion in October, from $14.546 billion in September.

Total personal finance commitments rose 5.2 per cent in October to $7,317 billion.