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New figures indicate fall in residential construction

Figures from the Australian Bureau of Statistics (ABS) indicated that the total value of construction work completed decreased to $51.1 billion in the September 2014 quarter – a 2.2 per cent change from the $51.9 billion recorded in the June 2014 quarter and a 5.1 per cent drop compared to the $53.5 billion recorded in the September 2013 quarter.

The value of construction work in both the engineering and building sectors fell 3.2 per cent and one per cent, respectively, compared to the preceding June quarter. For engineering, this represented a 12.1 per cent decrease compared to the same period in 2013, highlighting the impact that the winding down of resource-related construction work has had on the sector as projects move into their operational phases.

The building sector, on the other hand, was 5.8 per cent up on the previous year’s figures. Within this sector, the value of residential construction increased by 8.6 per cent compared to the September 2013 quarter. However, it was said that the 1.6 per cent decrease compared to the June 2014 quarter indicated that the residential building sector had passed its peak.

“These figures provide further evidence that the upturn in new home building activity may have peaked during 2014,” Housing Industry Association senior economist Shane Garrett commented.

“Australia needs to build about 180,000 homes per year over the longer term to meet its requirements. We have only recently reached this threshold, and the fact that we are moving below it again bodes poorly for the country’s housing prospects.

“We are in danger of falling behind in the quest to provide enough housing for future generations of Australians. Several factors act as major obstacles to the ensuring sufficient levels of new home building. It is vital that issues like land supply bottlenecks, planning delays and excessive taxation are dealt with as a matter of urgency,” he added.

JP Morgan economist Tom Kennedy reportedly agreed that the peak in housing construction had passed.

“We still think you’re going to get that boost from residential construction to the economy but it’s probably not going to be of the same sort of magnitude that you saw in the first and second quarters,” multiple media sources quoted Kennedy as saying.

CommSec chief economist Craig James appeared to be more positive about the sector’s future, with media reports stating he believed residential construction would improve over the next year.

“The mining investment boom has ended, leading to weaker engineering work,” he told the Australian Associated Press, “but residential and commercial building work is filling the void, still rising in trend terms.”

The ABS statistics also showed a slight decrease of 0.1 per cent in the value of non-residential building work compared to the June quarter, representing a 1.9 per cent increase compared to the previous year.

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