Rising apartment approvals – now at a 20-year high – drove an expansion in apartment construction work in February, but the other construction sectors contracted further, the benchmark Australian Industry Group-Housing Industry Association Australian Performance ofConstructionIndex has revealed.
The overall index, a weighted composite of building activity, orders and new business, deliveries and employment, contracted for a fourth consecutive month in February, falling by 2.0 points to 43.9. Readings below 50 points indicate a contraction in activity and the distance from 50 indicates the rate of the contraction.
Apartment building work was the only sector to expand in February, rising 10.8 points to 53.1.
The figures come a day after the government’s 2015 intergenerational report predicted Australia’s population would grow to 30.7 million by 2055, meaning another 9 million homes will need to be built during the next 40 years.
The latest Bankwest Housing Density Report says medium-density, new-home approvals are approaching a 20-year high, with 85,323 approvals in the 12 months to November 2014.
Approvals of medium-density dwellings – units, townhouses and semi-detached houses – accounted for more than half of all approvals in Sydney, Darwin, Canberra, Brisbane and Melbourne, the Bankwest report said.
Ai group director for public policy Peter Burn said: “Reports from house and apartment builders indicated an improvement in customer inquiries and buyer confidence in February. However, respondents also pointed to a highly competitive market environment for housing and slower new orders.”
The contraction in mining-related engineering construction (down 2.0 points to 42.7) weighed heavily on industry conditions last month.
Commercial building fell 7.2 points to 41.8, bearing the brunt of the decline in new orders.
House building declined for a third consecutive month, if at a slower rate (up 4.5 points to 45.4).
“Notwithstanding the return to growth in apartment building, further declines in house building and in commercial and engineering construction in February saw the overall contraction in the construction sector extend into a fourth month,” Mr Burn said.
“While house building is retreating from relatively healthy levels, it is no longer offsetting the well-entrenched decline in mining-related engineering construction activity. The near-term outlook for the sector is for continuing declines in activity, as suggested by the low level of new orders revealed by survey respondents.”
There were contractions across all components of the index, suggesting a broad weakness in construction. New orders declined by 6.9 points to 38.7, but the activity (44.7 points), deliveries from suppliers (46.7 points) and employment (47.6 points) sub-indexes were all relatively unchanged from January.
HIA chief economist Harley Dale said: “The dichotomy to Australia’s construction industry continues in 2015, with non-residential constructionin varying stages of weakness, but the residential sector looking relatively strong.”