Residential construction activity wanes

The Australian Bureau of Statistics (ABS) has released its latest Construction Work data for the three months to 31 December 2019, reporting a 3 per cent decline in overall construction activity (seasonally adjusted terms) – beyond market expectations (1 per cent).

The value of total construction work slipped to $49.7 billion, down 7.4 per cent in annual terms.

The overall decline was partly driven by a 4.6 per cent slide in residential construction work over the December quarter to $17.4 billion.

In annual terms, residential construction activity is down 12.8 per cent. 

This comes as new figures from the Housing Industry Association’s (HIA) National and State Outlooks have shown that the number of homes constructed in Australia fell from 225,061 in 2018 to just 174,770 in 2019 – the lowest level experienced by the industry since before the introduction of the goods and services tax for new homes.

According to the HIA, this slowdown in home building may be a significant contributor to the stalling national economy.

However, reflecting on the ABS data, HIA senior economist Diwa Hopkins claimed that the downturn in construction activity has “run its course”, pointing to the recent recovery in demand for housing.

“Confidence returned to the overall housing market at the end 2019, buoyed by interest rate cuts and house prices returning to growth,” Ms Hopkins said.

“We expect the improved conditions will flow through to the new home-building side of the market this year.”

However, Ms Hopkins noted that the next few cycles are likely to be “a fairly modest affair”.

“We estimate the industry commenced construction on 174,770 homes in 2019, and we are forecasting for activity to rise only marginally (by 0.6 per cent) in 2020,” she added.

“International factors may, however, impact on the volume of home building in Australia over the medium term.”

[Related: Home-building levels shrank drastically in 2019]