Australia's Residential Construction Sector is Looking Up


Activity across Australia’s construction sector surged again last month, as a jump in approvals for the construction of new homes boosted residential building.

The Australian Industry Group and Housing Industry Association Australian Performance of Construction Index increased 1.7 points on the index to 56.0 in February – above the 50-point reading indicating an expansion in activity.

The February figures signify a slightly faster pace of growth than in January, with the index recording stronger performances in the housing, apartment, commercial and engineering construction sectors.

Across the four construction sub-sectors, housing construction was the strongest performing area of construction activity in February with its rate of growth lifting to 61.8 due to an upturn in demand.

Related reading: Australia’s Construction Sector Continues to Expand into 2018

Apartment Construction

Activity in the apartment building sector also showed improvement, expanding at a robust rate to 56.9 after stable conditions over the previous two months.

Engineering construction also gained further momentum, up 1.0 point to 54.5, while commercial construction remained in positive territory at 57.8.

“The ongoing boom in apartment construction in metro areas, combined with investment in infrastructure projects, is ensuring strong conditions across the sector,” HIA principal economist Tim Reardon said.

“Pent-up demand for new housing is continuing to absorb record levels of new dwellings and a new phase of apartment construction is getting under way.

A considerable proportion of these new apartments have been delivered onto the rental market – helping to bring rental inflation to a 24-year low. This is good news for those who rent rather than own their homes," Reardon said.

Related reading: Retail Sales Miss Expectations Again

Construction photo2

February’s results marked the construction industry's 13th consecutive month of expansion according to the index, which recorded a 2.3-point increase in activity to 56.8 and a 5.4-point increase to 58.3 for deliveries from suppliers, while the employment sub-index increased at its fastest pace in seven months to 58.8.

“Employment growth was particularly healthy, pointing to employer confidence in the strength of the pipeline of work on their order books,” Ai Group Head of Policy Peter Burn said.

“High activity levels did not translate into higher margins, with selling prices rising by less than costs led by price rises for energy and construction materials.

“Wages growth appears to be strengthening at a still-moderate pace and this is reinforcing the willingness of employers to take on more staff."

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