This article is from the Australian Property Journal archive
TOUGH conditions in the construction industry have kept the sector in negative territory.
The Australian Industry Group/Housing Industry Association Australian Performance of Construction Index August was down 0.1 points to 43.2.
Ai Group director of public policy Dr Peter Burn said poor market demand, reduced work from school building projects and intense competition for existing contracts, impacted negatively across the sector.
All major sectors remained in the red in August, with house building falling to 38.4, the lowest reading in 16 months.
Engineering construction registered 40.3, apartment building 47.6 and commercial construction 42.9.
He added that the decline of activity and new orders in the house building sub-sector is of particular concern.
“The industry remains hampered by the failure of private demand to take up the slack left by the dwindling number of new public sector projects and the withdrawal of additional support for first home buyers.
“In the commercial construction sector in particular, an inability to secure funding for projects is a key element in the shortfall in private demand,” he continued.
HIA chief economist Harley Dale said as the positive impact from fiscal and monetary policy stimulus has unwound, it has become increasingly apparent that a first stage new home building recovery will not morph into a more sustainable housing up-cycle.
“Rising interest rates earlier in the year played a role in dampening demand, while the on-going lack of available finance for development is showing no material sign of improvement and is a major obstacle to a sustained recovery. If you add within this restricting environment the perennial supply side issues related to, for example, lack of affordable land and high taxation and regulation on new housing, it is difficult to envisage a short term turnaround,” Dale added.
Meanwhile new orders in house building declined for a third consecutive month, with a sub-index reading of 43.4. This was 1.2 points below the previous month to indicate a more marked rate of contraction. New orders in the apartment sector declined for a seventh consecutive month, with the index registering 44.8, a decrease of 3.1 points on the previous month.
In the engineering construction sector, new orders fell for a third straight month, although at a lesser rate with the sub-index rising by 4.5 points to 46.1.
For the commercial construction sector, new orders declined at a steeper rate with the sub-index falling by 3.1 points to 37.8. This was the lowest reading in the past ten months and appears to be linked to a moderation in public building works following a strong lift in school buildings approved in the second half of 2009.
Australian Property Journal
