The demand for new homes has been fuelled by the HomeBuilder stimulus, which the government announced on Sunday it will extend until the end of March.

Some builders have stopped taking orders for those seeking to use the grant, such has been its take-up.

Australian Bureau of Statistics (ABS) data shows there were 521 new dwellings approved in Ballarat from July to September.

That is an 88 per cent increase compared to the same three months last year, when 277 new dwellings were approved.

Nick Grylewicz, a director at property developer Integra, told The Courier that construction work was at unprecedented levels.

He said the federal HomeBuilder grants, which were introduced in June offering $25,000 to those building new homes or carrying out extensive home renovations on land valued less than $750,000, have had a significant effect.

"HomeBuilder has done a tremendous job," Mr Grylewicz said. "It has really increased the interest in building, and supported the construction industry."

"It's spread work across all the regional builders - they're all really busy and have six months' work ahead of them now, if not longer."

On Sunday, Prime Minister Scott Morrison announced the scheme would be extended to the end of March, with the grant reduced to $15,000 but property value caps raised to $850,000. Builders believe it will prompt yet more work.

One of those builders is Rob McMaster, a director at the Ballarat franchise of G.J. Gardner Homes. He said his business has had the highest number of leads it has ever had in recent months.

In fact, Mr McMaster said that apart from March, demand in Ballarat had been higher than ever this year.

"We went into April, not sure what we were going to get - and we ended up having an exceptional month. We haven't looked back since."

The 198 building approvals issued in September, the latest month for which data is available, is comfortably the highest in the past five financial years. It exceeded a previous high of 168 established the month before in August.

Master Builders Association of Victoria chief Rebecca Casson also suggested those high levels were due to the new HomeBuilder scheme.

"Builders in the [Ballarat] area have told us that many projects that had gone on hold were reactivated when HomeBuilder was announced," Ms Casson said.

The building approval rate in Ballarat has accelerated faster than in the two other largest regional centres in Victoria, Bendigo and Geelong.

In the same three months, there was a seven per cent increase in Bendigo and a 35 per cent rise in Geelong. Neither city registered record highs in any of those months.

Even before the introduction of HomeBuilder, approvals in Ballarat had remained high - apart from a dip in March - despite the impact of COVID-19 restrictions.

Overall there were 1224 approvals in Ballarat in 2019/20, a slight fall in the 1282 from the previous year.

The vast majority of the approvals so far this financial year have been in Alfredton and Delacombe at 210 and 162 respectively. Both lie within the existing growth areas of Ballarat.

The ABS cites the total value of the newly approved dwellings - which are mostly houses - at about $152 million.

The construction industry across Ballarat is estimated to account for about 13 per cent of the local economy.

The rise in approvals correlate with reports from a recent council meeting when future growth areas of the city were discussed. In September, the City of Ballarat's director of development and growth Natalie Robertson said the number of lots sold this year in the existing growth suburbs had increased by 100 per cent in the past 12 months.

At that final meeting of the previous council, a submission by 10 developers pushed for the new growth areas to be established as urgently as possible, citing the surge in demand.

Two areas - one around Mount Rowan and another to the west of the existing western growth area - have been earmarked for further residential development.

Councillors raised concerns about whether the establishment of new growth areas could hamper the progress of residential development within the CBD. Ms Robertson said she believed infill levels in the city were tracking on target.

The City of Ballarat's planning scheme specifies a target of 50 per cent development within established residential areas, and 50 per cent in growth zones.

Ms Casson said she believed it was important to keep plenty of room free for growth.

"The challenges ahead for Ballarat and many regional centres will be on land availability," she said.

"To lead that recovery, land will need to be freed up quicker so this demand for building can be met, or otherwise the recovery could grind to a halt."

There have been significantly more applications for the HomeBuilder scheme in Victoria than elsewhere.

As of November 20, there were 7,636 applications across the state, with Queensland showing the second highest demand with 5,954.

Only a small percentage of the grants - which are supposed to be released once work has begun - have been paid so far.

Under the terms of the grant, building must begin within six months of a contract being signed, with the original three-month stipulation extended in Victoria due to the lockdown restrictions.

However, even with that extra flexibility, Mr McMaster said the demand triggered by HomeBuilder could place a strain on the local construction industry as buyers push for works to begin in time.

"There are only so many concreters in Ballarat, for example," he said.

"We're going to be under a bit of pressure to get these slabs on the ground. We don't want to be responsible for people not getting a grant. These are the side effects from the stimulus."

He said many in the construction industry would welcome a further extension to the start date deadline to allow builders to meet demand.

The federal government announcement on Sunday did not suggest any further changes to the six-month deadline in Victoria.

Mr Morrison described the scheme as "a key part of my government's economic recovery plan for Australia."

The extension is expected to allow the grant to be used in a further 15,000 home construction projects. That would add to an estimated 27,000 homes already being built nationwide with HomeBuilder assistance.

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