Home Building Sluggish

Thursday, February 27th, 2014
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The housing construction sector struggled to gain strength at the end of 2013, a sign that the recovery in non-mining investment is still sluggish.

The amount of construction work done in Australia fell one per cent in the December quarter, Australian Bureau of Statistics figures show.

National Australia Bank senior economist Spiros Papadopoulos said the big disappointment was the 1.7 per cent fall in the amount of residential building work done in the quarter.

He said the housing construction sector struggled to gain strength at the end of 2013, a sign that the recovery in non-mining investment could still be weak in 2014.

“With all the monthly indicators pointing to some better growth we had hoped to see residential activity grow about two per cent,” Mr Papadopoulos said.

“It looks like there is very little improvement in non-mining investment activity.

“The RBA (Reserve Bank of Australia) had hoped that dwelling investment would be one of the brighter lights of investment growth this year but it’s a very slow recovery.”

Mr Papadopoulos said he still expects the RBA to cut the cash rate late this year.

Total building work done in the December quarter, including homes and non-residential buildings like offices and shops, fell 1.6 per cent, the ABS said.

Engineering work done, which includes mines, roads, bridges and the like, was down 0.5 per cent in the quarter.

Commonwealth Bank economist Gareth Aird said the fall in engineering construction was to be expected.

“This result wasn’t too bad and was consistent with our previously held view that mining construction would peak in the second half of 2013,” he said.

“Looking ahead, large scale liquefied natural gas (LNG) projects in Western Australia and Queensland will mean that engineering construction should remain near elevated levels over the near term.

“But in our view, we have reached the peak in engineering investment and we expect moderate declines to continue over coming quarters.”

Mr Aird said there seems to be a longer lag between the rise in building approvals data and construction work done figures, which he says could be because more multi-unit dwellings are being built.

“There is usually a bigger lag between apartments being approved and construction commencing compared with houses,” he said.

“We expect to see a pickup in residential construction over the next few quarters.


By Jason Cadden
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