Whilst Santa Clause may be scheduled to visit many Australian households this month, it is becoming increasingly apparent that offices of residential construction firms are not on his schedule as the latest figures further reinforce a bleak near-term outlook for residential construction.
After already having hit two year lows in September, the seasonally adjusted value of residential buildings approved in October fell a further 6.8% in October (see chart), according to the latest data from the Australian Bureau of Statistics (ABS). At this level, residential building approvals are at their lowest level since July 2009.
Although multi-residential construction has been the worst-hit area, the decline is affecting all areas of new residential construction. The total number of stand-alone houses approved in October (seasonally adjusted) fell 7.5% in October whilst multi-residential dwelling numbers were down 16.8%. Compared with the same period one year ago, the number of seasonally adjusted dwellings approved was down 29.8%.
And whilst the latest data from Housing Industry Association (HIA) shows a rebound in new home sales in October, sales of new homes are still down 8.8% over the past three months.
Taken together, the home sales and approval data point to a bleak outlook for housing construction in 2012. In its mid-year budget review, the Department of Treasury forecasts an increase of just 1.25% per annum in dwelling investment throughout both 2012 and 2013. And HIA expects the number of housing starts to fall by a further 1% in 2012 after having already fallen an estimated 13% this year.
The residential construction sector has experienced weak conditions throughout 2011 after many new home purchases were brought forward in 2009 to take advantage of the boost to the first home owners grant.
The outlook is no better in non-residential housing. At $6.191 billion, the seasonally adjusted value of non-residential building approved in the three months to October was down 11.21% when compared with the same period last year. Worse, the department says it expects a 5% decline in the value of non-residential building in 2012.
In light of the poor data, HIA is calling for more interest rate cuts and for the government to abandon its aim of achieving a budget surplus in 2012/13.
“This outcome (building approvals) vindicates the November interest rate cut, justifies the case for a further cut next week, and highlights the folly of blindly focusing on a budget surplus objective for 2012/13” says HIA chief economist Harley Dale.
Good Times Roll on for Engineering
In contrast to the building sector, however, the outlook for civil construction in Australia, which has performed extremely well over the past twelve months thanks to huge demand from mining projects and associated infrastructure, continues to improve in leaps and bounds.
As reported previously in DesignBuild Source, the latest private capital expenditure data indicates that investment in buildings and structures relating to mining was up by almost two-thirds in the September quarter. Moreover, in its mid-year review, the treasury department says it expects huge increases of 29% and 23.5% in engineering construction activity in 2011/12 and 2012/13 respectively.
Source: Design Build Source
