Mixed emotions with realistic data showing confidence in property market

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The residential construction market continues to drag on the economy, with housing construction work falling again in the final quarter of 2019, and as we’ve seen recently there’s not too much gain due to supply demands through shortfalls caused by the China shut down.

CommBank Senior Economist Belinda Allen said “Although residential construction had fallen, there were signs of a stabilisation.  And with dwelling prices now rising and building approvals flattening out we expect residential construction work done to stabilise in the second half of 2020,” Allen said.

“Victoria fell by 2.1% but there are signs approvals are lifting in this state given the strong population growth and a low rental vacancy rate,” said Allen.

The Australian Bureau of Statistics (ABS) reported falls in new residential building in Queensland by ?14.2%, New South Wales by ?5.4% and Western Australia by ?4.5%.

CommSec’s chief economist Craig James said “Residential work is down by 15% from 18 months ago, with work flows are now adjusting to a more balanced supply-demand metrics, and there is still plenty of construction work to go around”.

“Some firms like Monadelphous continue to highlight the difficulty in attracting and retaining good skilled workers for engineering projects,” James said.

The ABS construction stats on the value of construction work completed in Australia, reveal that residential building construction rates fell by 4.6% over the December quarter.

Non-residential construction activity also fell by 3.4% during the period, which is a fall of 12.8% seasonally-adjusted over the year.

Engineering construction fell by 1.5% over the December quarter, which is a fall of 3.1% seasonally adjusted within privately funded construction activity.

The overall value of construction work done is down by 7.4% to this time last year, down by 3% seasonally-adjusted.

There was good news with gains in South Australia by 2.3%, Tasmania by 2.4% and the ACT by a healthy 9.0%.

Diwa Hopkins, senior economist with the Housing Industry Association (HIA) said “Although international factors may impact on the volume of home building in the medium term, the home building contraction had just about run its course”.

“Confidence returned to the overall housing market at the end 2019, buoyed by interest rate cuts and house prices returning to growth,” Hopkins said, adding that the HIA anticipated the improved conditions would flow through to the new home building side of the market this year.