Developer Australand Property Group (ASX:ALZ) says housing affordability will become more and more difficult due to higher interest rates although the company remains well placed to meet Australia's housing shortage.

The current demand deficiency of about 200,000 homes was being steered by robust population growth, low rental vacancy rates and improving employment figures in major capital cities, according to Australand managing director Bob Johnston.

"There is currently a shortage of some 200,000 homes at a national level and probably about half of that demand is in Sydney," Mr Johnston said.

He said the primary constraint was the amount of land being made available, both greenfield sites and urban infill.

Demand was strongest in Melbourne and Sydney, which accounted for 70 per cent of the total lots Australand sold in the first half of 2010, the company said.

According to Mr Johnston, the number of first home buyers had slumped from 25 to 30 per cent of sales to around 10 per cent.

"I do expect that to recover back up over time to normal levels of about 15 per cent.

"We are seeing more repeat buyers coming back into the market and investors are making a comeback, too."

Mr Johnston said Australand was in discussions about development opportunities in Western Australia, where the market continues to be relatively solid.

"I would say the market in WA has slowed in the last two months, but the long-term fundamentals remain relatively robust.

"The resources sector will continue to deliver strong growth in that market, so being there is a strong proposition for us."