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Figures Show Surge in Australian Building Activity

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Australia Harbour Bridge

Residential building activity in Australia has shown a sharp uptick in the first quarter of 2014, and preliminary data from the Australian Bureau of Statistics (ABS) showing strong growth. Over AUS$13bn of residential building work was completed in the March 2014 quarter, which represents a quarter-on-quarter increase of 6.8% and a year-on-year jump of 8.4%.

In detail, the figures show that the value of work done on multi-unit dwellings showed the highest rise, consistent with the indications from housing approvals data. The jump in the value of work done on multi-unit dwellings was the strongest driver of the growth in activity sector wide, accounting for around two thirds of the quarter’s growth, according to Housing Industry Association economist Geodan Murray.

‘It is encouraging to see work done on detached homes posting strong gains,’ Mr. Murray said. ‘Also, a second consecutive quarterly improvement in the amount of work done on home renovations is a positive sign for this part of the industry after activity dropped to decade lows in 2013.’

The value of work done on new detached homes increased by 4.7% to a level 2.4% higher than a year earlier, while the value of multi-unit work rose by 12.7% to a level 19.6% above the March quarter of 2013. The value of renovations work increased by 0.7% to a level that was 5.8% higher than last year.

Mr. Murray pointed to data from the building industry, which predicted the current rise, saying, ‘Dwelling approvals activity was particularly strong in the final quarter of 2013, so it is natural that we now see an improvement in the level of building work being done.’

The trend for home commitments was slightly higher overall – 0.2% up month-on-month to March – than for the owner-occupier group, at 0.1%. Rising faster than both was the investor group, growing at 0.4%. While we might see a market driven by investors and featuring a lot of single-unit sales, especially detached homes, as being a luxury market like Paris or London, the picture in Australia is of a growth at all levels, with important implications for the Australian economy as a whole.

Mr. Murray explains, ‘this bodes well for aggregate economic growth. The result suggests that residential building should make a stronger contribution to GDP growth in the [March] quarter.’

While house building activity has risen, housing prices have suffered their sharpest fall for over five years, according to RP Data’s monthly house index.  CommSec’s chief economist, Craig James, said the change may be the result of the federal budget. ‘House prices couldn’t lift forever,’ Mr. James said. ‘At some point there had to be a correction and it seems the federal budget caused people to pause and take stock.’

RP Data’s research director, Tim Lawless, said seasonal factors also played a role. ‘Historically,’ Mr. lawless pointed out, ‘housing market conditions have softened in April and May as the market rebalances from what it typically a seasonally strong first quarter.’

The picture is of a seasonal alteration in market growth, with some additional downward pressure from the budget, but on a sector that’s basically buoyant and likely to expand, built on a sustainable economic base.

Les Calvert is the owner and CEO of many internet property and travel related websites including this overseaspropertymall.comand he regularly writes news and articles for his websites, trade magazines and newspapers.