Residential Building Hits Highest Numbers in Seven Years 1

Monday, February 23rd, 2015
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Cast your mind back to November last year and you may recall dire predictions that the upturn in residential building has peaked.

Master Builders’ forecasts were more bullish in their outlook predicting a strengthening upturn and record highs, and we are now seeing the benefits for the wider economy begin to flow from the highest level of residential building starts on record.

Indeed, Master Builders National Survey of Building and Construction shows that key many key indicators rose in the December quarter 2014 to the highest they have been in seven years, finally returning to pre-GFC levels.

As one of the few bright spots in an economy suffering the effects of fragile business confidence, the looming housing boom is seeing strengthening confidence and profitability in the residential building sector that in turn is driving an increase in hiring intentions for tradespeople and apprentices.

It’s particularly pleasing that the industry is set to provide more opportunities for rewarding careers for young people, with survey respondents indicating their intention of putting on more apprentices in the coming months.

The lift in builders’ hiring intentions comes as the ABS has recorded an increase in unemployment and highlights the key role of building and construction in filling the gap in investment and jobs left by the mining boom.

Other survey indicators have also strengthened.

Builders see significantly higher industry activity ahead in the next six months, which is translating into increased confidence in their own business prospects which have been trending up over the past two years and now approaching pre-GFC levels.

This has sparked a corresponding uptick in builder’s intentions to invest in a new plant and equipment which will bestow benefits on the wider economy.

However, while improvement in the commercial construction sector is anticipated, conditions in the sector have some way to go before they could be described as healthy.

Fragile business confidence is holding the sector back as it continues to suffer from a lack of investment and, in our Pre-Budget Submission, Master Builders is calling for the Government to adopt a more pragmatic budget repair strategy to arrest the slide in confidence.

Master Builders is recommending that the Government:

  • Reassess and recalibrate the composition of reforms needed to address the structural deficit, lift productivity and grow the economy
  • Reconsider the strategic timing a return to surplus and adopt a more pragmatic approach to resolving parliamentary logjams
  • Introduce short-term tax incentives for commercial and other business investment to help bring forward activity and provide a critical prop for the transition of the economy from the mining boom
  • Include the building and construction industry as a priority industry for the new Industry Skills Fund, recognising the looming housing boom is creating more opportunity to provide rewarding careers to young people and the industry will require 300,000 new workers over the next decade
  • Maintain the level of investment in apprenticeships and skills acquisition while making this expenditure more efficient and targeted to industry needs, including targeting financial assistance to employers to lift apprenticeship commencements and completions to deal with a looming skills crisis in the industry.

A more pragmatic approach to budget repair and dealing with the Senate would help ensure business confidence is not further undermined as the economy increasing feels the effects of the receding resources boom and help ensure that the positive opportunities created the looming boom in residential construction are maximised.

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  1. Molly

    About time – price levels in major cities are reaching prohibitive heights for the average Australia.