Construction Sales Contracts Hit 16-Year Lows

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Wednesday, October 23rd, 2013
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Despite an improving residential sector, overall conditions in the construction industry in Australia remain extremely soft, with new data showing the number of sales contracts builders are bringing in coming in at 16-year lows.

Making matters worse, both profits and the backlog of work on the books are lower than at any time in the past 10 years.

Published by Master Builders Australia, the September Quarter National Survey of Building and Construction indicates that despite a lift in housing starts in some states, overall industry conditions throughout the nation remain subdued.

The survey found that while builder confidence remains neutral, sales, profits and overall business conditions are at or near 10-year lows.

Sitting at a paltry 30.4 on an index between zero and 100, the index for sales contracts registered its lowest reading at any time during the past 16 years.

Also, the proportion of firms with more than six months’ worth of work on their books came in at decade-long lows of just 22 per cent, with one in 10 builders having less than a months’ worth on their books and a third having between one and three months’ worth.

sales and profit chart

Meanwhile, the survey underscores the continued impact of subdued building conditions upon the sector’s workforce, with the index for employment intentions over the next six months (43.9) remaining well below the 50.0 mark which separates plans on the part of builders to expand their workforce from intentions of reducing headcount.

Indeed, the survey found that skills are becoming easier to find (off an already low base) in 10 out of 16 occupational categories, with painters, scaffolders, roof tilers and labourers being in extreme oversupply.

work on books chart

Master Builders Australia chief economist Peter Jones says while businesses are cautiously optimistic about an ’embryonic recovery’ being underway, on-the-ground business conditions remain challenging and builders are experiencing extremely low levels of key forward indicators such as display centre traffic and commercial building enquiries.

“Residential builders are hopeful business conditions will improve somewhat over the next six months, but this confidence is tempered by the dire day to day conditions experienced by the industry,” he said. “The outlook for commercial building is even less rosy. A pick-up is not on the cards in the immediate future.”

national availability of labour

The latest survey follows the most recent Performance of Construction Index survey which shows that overall conditions in the industry continue to deteriorate, albeit with the pace of that deterioration being slower last month than at any other time in the past three years.

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