Despite expectations of a near-term uptick in starts, construction activity in Victoria appears to be easing back for now.
According to the latest figures from the Australian Bureau of Statistics (ABS), the seasonally adjusted value of buildings approved in the state fell by 8.39% in September to $1.771 billion – the second lowest level since April 2010. During the three months to September, seasonally adjusted approvals were down 7.9% compared with the June quarter.
Furthermore, in November, construction information service provider BCI Australia expects the overall value of construction starts in the state to be lower than at any other time this year.
Bottom line: new work is now coming in slower than it has over recent months.
Residential building conditions remain weak. In September, Victoria recorded its biggest ever drop (6.6%) in detached house sales, according to Housing Industry Association (HIA). Approval data is no more encouraging: at $3.792 billion, the value of dwelling approvals in the September quarter this year was down 7.16% on the June quarter and 12.49% from the September quarter last year. In September alone, seasonally adjusted residential approvals dropped 3.3%. Moreover, after a surge in activity over the past four months, BCI expects the value of residential construction starts in the state to drop by 55% over the next three months.
The pause in overall construction activity, however, could be short-lived. As shown in the chart below, by January, BCI expects a the value of construction starts in the state to surge to levels higher than at any time this year – primarily thanks to an anticipated rise in the ‘community’ sector (health and recreation). Furthermore, in the three months to January, BCI expects the value of starts to be up 19%.
Moreover, the news in residential is not all bad. Melbourne based MAB Corporation said recently it still intends to build Victoria’s largest residential project – the $1 billion Merrifield master-planned community project in Melbourne’s northern suburbs, despite having failed to reach an agreement with Lend Lease on the project. Merryfield will now develop that project on its own. Structural plan approval is expected early next year.
At the same time as activity takes a breather, the labour force appears to be getting tighter. According to the most recent ABS figures, the total number of people employed in Victoria’s construction industry during the three months to August came in at 263,000 – up from 261,300 in the three months to May and well above the 251,500 during the three months to August 2010.
Key moving sectors:
Health
As mentioned above, BCI expects an upsurge in starts in health and recreation, primarily as a result of the imminent start to works on a new building adjacent to the existing building at Box Hill Hospital as part of the Box Hill Hospital Redevelopment Project.
Key projects:
Box Hill Hospital Redevelopment Project (upcoming)
St John of God Hospital (Geelong) (upcoming)
Deakin/Epworth Private Hospital (upcoming)
Transport
With the recent announcement that it is full steam ahead for a new $9 billion deep-water port at Hastings, there are signs of activity in the transport sector.
Key projects:
Port of Hastings (recently announced)
Regional Rail Link – Package E (Deer Park to West Werribee) (upcoming)
Electricity
Despite investor uncertainty arising out of new restrictions on wind projects, there is also some activity in the electricity construction sector.
Key projects:
Macarthur Wind Farm (recently commenced)
Victorian Large Scale Solar Project (Mallee Solar Farm) (in planning)
Yallourn Gas Power Station Project (in planning)
Source: Design Build Source
