Building Activity Falls Across December Quarter

Building activity ended 2022 as it had spent much of the year—down—falling by 1.6 per cent for  the December 2022 quarter.

The data from the ABS construction activity report for the quarter showed that national building activity declined during the quarter to $30,578.6 million compared to the September quarter.

Engineering activity, which usually encompassed infrastructure activity, increased by 1 per cent to $24,693.5 million for the last quarter of 2022.

Within the building activity segment, residential building activity increased by 0.9 per cent nationally during the quarter compared to the previous quarter while non-residential building activity decreased by 5.1 per cent.

Detached house construction activity (which does not include the data for apartment construction) decline 1.4 per cent.

BIS Oxford Economics global construction forecasting head Nicholas Fearnley said that decline was down to issues in the industry.

“The 1.4 per cent fall in house construction activity shows that capacity constraints are hampering activity levels, and points to the elevated backlog of work that has developed over the past two years and that will continue to support construction activity for some time,” Fearnley said.

Despite the fall in non-residential building activity, Feranley said he did not expect this decline to continue this year.

“We expect activity to firm over 2023, supported by a sizeable pipeline of public projects including schools, train stations and hospitals,” he said. 

“Sectors hit hard by the border closure and movement restrictions are also expected to rebound while the tailwind behind asset classes that have benefited through the pandemic, including warehouses and data centres, is set to persist.”

New South Wales and Western Australia recorded increases in building activity with 1.3 per cent and 5 per cent respectively.

Victorian building activity declined by 2.5 per cent, Queensland was down 1 per cent, South Australian by 8.6 per cent, Tasmanian 3.5 per cent, Northern Territory 6.5 per cent and the Australian Capital Territory’s declined 7.9 per cent.

However, comparison with the December 2021 quarter tells a different story.

Building activity in NSW, WA and Victoria has increased compared to the last quarter of 2021, up in 2022 by 1.8 per cent, 6.8 per cent and 3.8 per cent respectively. 

On a year-on-year basis for the quarter, Queensland’s building activity dropped by 3 per cent, South Australia’s was down 5.5 per cent, Tasmania’s declined 2.3 per cent, the Northern Territory down 18.9 per cent and the Australian Capital Territory’s lost 12 per cent.

Change in building activity

_{Source: Construction Work Done, Preliminary Report, February 2023, Australian Bureau of Statistics}  


Fearnley said it was not expect the changes in demand for housing would show in the data for another few years.

“Demand for new homes, however, has fallen significantly in response to building costs, delays and credit availability,” he said.

“This isn’t expected to materially affect the work done numbers until the back end of 2024 and 2025.”

Engineering activity increased by 1 per cent in the December 2022 quarter driven by increased government investment in infrastructure projects.

“Activity is forecast to grow over the coming years, supported by a large pipeline of publicly funded transportation projects,” Fearnley said.

He said pricing would also gradually improve as the market reacted to inflation and other factors.

“Ultimately, higher prices encourage a supply response, as higher wages attract more workers to the construction sector and stronger material prices encourage suppliers to bring more capacity online,” Fearnley said.

“The strong demand for construction activity, both domestically and globally, over the coming years ensures that the supply side response to high prices is unlikely to create a ‘whipsaw’ effect, whereby we see a sharp fall in construction costs.”

Data in the report is collected directly from a survey of organisations and entities within the construction industry, with an average response rate of 85 per cent. 

Recent reports have seen a response rate of 70 per cent according to the ABS, signalling that further corrections to estimates and figures may need to be made.