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Pace of Housing Construction Decline Eases in October

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The robust turnaround in house prices is taking its time to flow through to construction, with residential building slowing for the 15th consecutive month, according to the monthly performance of construction index.

The pace of decline in the house building sector showed some improvement, particularly in new orders for standalone houses thanks to the post-APRA rebound in homebuyers.

Construction activity pulled back for the 14th consecutive month in October, albeit at a slower rate, registering a seasonally-adjusted 43.9 points. An index reading below 50 represents a decline in activity, while a reading above indicates growth.

Apartment construction remains the weakest performing sector, declining for a 19th straight month as building approvals continue to trend downwards.

“It will be some time before the residential building sector is once again expanding; in the meantime low interest rates will provide support,” HIA senior economist Geordan Murray said.

Speaking at a CFA Societies conference last month, Reserve Bank deputy governor Guy Debelle said that he expects 2020 to be the “low year” for residential construction.

Debelle said that the shortfall in housing supply would trigger a larger price response in house values.

Related: Australia’s House Prices Forecast to Grow 5pc in 2020


Index this monthChange from last month12-month average
Apartments34.70.033.1
House building48.21.839.5
Engineering36.6-2.146.3
Commercial45.9-0.345.4
Australian PCI43.30.643.0

^Australian performance of construction index, October. Results above 50 indicate expansion.

And the turnaround in house prices has been more fast-moving than expected, with Sydney prices recovering 5.3 per cent since their May 2019 trough and Melbourne prices making a 6 per cent comeback.

Activity in commercial construction remains subdued as concerns persist about the current lull in infrastructure activity.

Engineering construction fell at its sharpest rate in six years, with commercial construction remaining in negative territory for a 15th straight month.

“This highlights the need to shore-up decision making on infrastructure projects to help inject additional stimulus across the wider construction industry,” Ai Group head of policy Peter Burn said.

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Article originally posted at: https://theurbandeveloper.com/articles/house-construction-decline-moves-toward-stability