Green shoots may finally be emerging in Australia’s housing construction sector as confidence in the sector appears to be growing, a new survey suggests.

The Royal Institute of Chartered Surveyors has released the March quarter edition of its Global Construction Monitor report.

Based on a survey involving 2,770 participants, the report provides a guide to conditions and trends in construction and infrastructure markets around the world.

From an Australian viewpoint, the survey found that the outlook in term of activity remains relatively robust.

Overall, the Construction Activity Index (CAI) for Australia edged up from +10 in the December quarter to +11 in the March quarter.

The index measures current conditions and 12-month expectations in terms of residential workloads, commercial/non-residential building workloads, infrastructure workloads and profit margins. It thus provides an invaluable leading indicator of the current and near-term outlook for construction activity.

Any reading above 0.0 indicates positive overall conditions.

Encouragingly, the survey appears to indicate early signs of a recovery in new housing development.

The indicator for private residential workloads shot up from +2 in the December quarter to +12 in the March quarter.

In other sectors, the indicator for private non-residential workloads also strengthened and recorded a positive net balance of +3 whilst that for infrastructure workloads eased back from +20 but remained at an elevated level of +14.

Within the infrastructure sector, top performing subsectors include energy (+46), water/sewerage (+32) and social infrastructure such as hospitals and schools (+23).

As a leading indictor of construction market activity, the RICS survey may well provide an early indication of improving conditions in residential building.

Whilst current levels of activity remain extremely subdued, there is a sense of strong underlying demand for new home construction on account of surging migration and extraordinarily low levels of rental vacancies.

Thus far, however, data relating to building approvals and housing construction lending remain at near ten-year lows.

Outside of activity, the survey further highlighted ongoing challenges which are associated with the current skills shortage.

When asked about barriers to further construction activity, survey respondents noted skills shortages, labour shortages, material costs and financial constraints as the most significant factors.

Within the skills shortage, respondents nominated tradespeople, quantity surveyors and managers as the areas where availability is most severely depleted.

Kevin Brogan, RICS Australasian Board Chair, welcomed the results around housing but stressed the need for further action to address the skills deficit.

“These results are an encouraging early sign that the policy shift from infrastructure to housing is starting to gain momentum,” Brogan said.

“This is significant given the importance of addressing housing affordability.

“These results also underline the well-known need for concerted and broad policy responses to address the skills shortage and should include consideration of how global professional bodies such as RICS can assist.”

 

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