This article is from the Australian Property Journal archive
THE construction industry has contracted slightly in March with demand weakening across the sector, following two months of growth.
According to the Australian PCI index, construction activity registered 48.7 points below the critical 50 points mark due to a decline in new orders and activity.
House building was flat in March following eight consecutive months of expansion. The apartment sub-sector contracted for the second month in a row and engineering construction also lost ground.
However commercial construction continued in positive territory in March building on a gradual recovery evident since January.
Ai Group public policy director Dr Peter Burn said the operating environment remained difficult with tight credit conditions, subdued client demand and project delays having adverse impacts on construction companies.
HIA senior economist Ben Phillips said the residential construction numbers for houses and apartments confirm a worrying downward trend for the new homes sector.
Meanwhile new orders contracted following growth over the first two months of the year. This was, underpinned by a marked weakening in orders received by house building firms, and higher rates of decline in the engineering and apartment building sectors.
Dr Burn said the further increase in interest rates last week is likely to dampen activity at a time when new orders are already falling in all of the sub-sectors other than commercial construction.
“The fall in new orders in the house building and apartment sub-sectors comes at a time when there is already a shortage of housing and a growing gap between demand and supply. Businesses attributed the decline in housing new orders to the end of the first home buyers’ boost and the rise in interest rates since October,” he concluded.
Australian Property Journal
