Apartment building falls for six months in a row

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INFRASTRUCTURE projects have offset the ongoing decline in apartment building to keep the construction sector relatively steady in August, while uplifts in new orders for engineering and commercial project suggest gains ahead, according to the latest Australian Industry Group/Housing industry Association Performance of Construction Index.

The Index reading fell by 0.2 points to 51.8, but the reading above 50 marked the 19th consecutive month of expansion.

Apartment building dropped for the sixth consecutive month, by 3.9 to 32.8, as engineering was up 0.6 to 55.0. Commercial construction lifted slightly to 49.2, while house building fell into negative territory at 49.8. Construction activity broadly fell by 1.2 to 49.5.

Ai group head of policy, Peter Burn, said lower levels of new orders in the residential sub-sectors point to further slowing, while commercial construction and engineering construction pipelines of new work grew more rapidly over August, pointing to further gains in the period ahead.

New orders jumped by 6.5 to 56.8, its strongest result in six months. The house building sector registered a fall for the first time in 19 months, down by 8.5 to 45.1, and apartment building dipped 2.9 to 41.3 for a 10-point decline over the past 13 months.

Commercial construction sector new orders lifted by 5.4 points to 55.6, underpinned by accommodation, offices, education, industrial and aged care projects. Public infrastructure investment helped engineering to a jump of 16.5 points to 68.4.

HIA Economist, Diwa Hopkins, said the significant withdrawal of investors from the market had been a key driver of the cooling in building activity.

“Foreign investors in particular now face additional federal and state-based taxes when purchasing new housing in all but one of Australia’s eight states and territories. Domestic investors are now subject to tighter credit conditions which are weighing on their demand for new housing,”

Hopkins said access to finance issues are unlikely to ease in the near term, saying more independent mortgage rates moves were likely to follow those of Commonwealth Bank and ANZ on Thursday, shortly after Westpac at the end of August.

“Add to these factors a situation of falling house prices in the key Sydney and Melbourne markets, and the list of deterrents to investor activity is quite varied. We expect credit conditions to continue to weigh on new home building activity into 2019,” Hopkins said.

Australian Property Journal