7 INDUSTRY POINTS TO NOTE AS HOME BUILDING FALLS TO NEAR SIX-YEAR LOW

7 INDUSTRY POINTS TO NOTE AS HOME BUILDING FALLS TO NEAR SIX-YEAR LOW

Contrary to expectation the effects of the Covid-19 lifestyle has improved the economy in some ways. According to the Halifax in 2019, house prices were rising at the slowest annual pace for more than six years. This year, however, there was a surge in home renovations that complement the slump in third-quarter new apartment construction as the pandemic slowed activity and dampened buyers’ confidence to commit to new dwellings.

According to the Australian Bureau of Statistics (ABS)  last week, new dwelling construction fell 1.9 per cent in the September quarter, apartment-building work dropped 6.2 per cent and new house construction picked up 1.1 per cent – the value of alterations and additions jumped 5.1 per cent.

Kristina Clifton, Senior Economist at CBA, said they had been expecting strong renovations activity to come through in the ABS data based on their internal data showing solid growth in lending for renovations over this year.

Here are 7  Industry Points to Note As Home Building Falls:

  • The figures showed total residential construction fell 1 per cent from $17.4 billion in the June quarter to $17.2 billion in the three months to September,  and 8.9 per cent down on a year earlier. Economists remain confident that the economy is still on track to shrug off its first recession in 29 years.
  • The quarterly construction numbers which contribute to next week’s third-quarter GDP result paint a more positive picture than the 4 per cent decline in housing construction that analysts were expecting. The previous quarter’s 5.5 per cent drop in homebuilding was also revised to a lesser 3.9 per cent decline in the latest figures.
  • As noticed by JP Morgan economist Tom Kennedy, construction activity was weaker than expected and the relevant GDP inputs from last week’s release were not too distant from underlying assumptions, thus, the forecast for next week’s third-quarter real GDP print might remain unchanged at +2.4 per cent. However, he continues to flag some upside to this outcome (and a generally wide confidence interval) given the likely strength in household consumption, particularly spending across the services sector.”
  • As stated by BIS Oxford Economics senior economist Nicholas Fearnley, the weakest quarterly homebuilding figure in almost six years reflected the decline in new dwelling approvals in 2018 and 2019.
  • Economic headwinds remain. The 2.6 per cent contraction in total construction output for the quarter – driven mostly by a 3.3 per cent decline in infrastructure work to a total $22.2 billion – was a worse readout than the expected 1.9 per cent drop.
  • The slowdown in commercial construction gained pace, with the value of work-done falling 3.5 per cent to $11.8 billion, after a 1.5 per cent contraction in the second quarter. Non-residential building construction activity is expected to remain weak over 2021.
  • The decline in engineering construction reflected a 7.2 per cent fall in privately funded work driven by a slowdown in electricity investment. Mining construction activity was stable and likely to grow over the coming years.

Reference

  • Housing Approvals Hit High in October

by DINAH LEWIS BOUCHER

https://theurbandeveloper.com/articles/house-building-approvals-hit-20-year-high

  • House price growth at six-year low, says the Halifax

By Kevin Peachey

https://www.bbc.com/news/business-49959237

  • Homebuilding falls to near six-year low

By Michael Bleby

https://www.afr.com/property/commercial/home-building-falls-to-near-six-year-low-20201124-p56hn9