Home building activity continued to drop off in February as property prices sank further, offering little solace for the nine per cent of the country’s workforce employed in the construction sector.
The number of people in building-related work shrank for the seventh consecutive month in February as prospective homebuyers turned cautious, according to the Australian Industry Group/Housing Industry Association Australian Performance of Construction Index released on Thursday.
‘Investors and owner occupiers are delaying purchase decisions as the credit squeeze plays out and interest from foreign investors has waned,’ Housing Industry Association economist Tom Devitt said.
‘The Australian PCI shows the housing market downturn accelerated in the second half of 2018. Across detached houses and apartments, activity is contracting and so too are new orders.
‘The pipeline of building work looks to be shrinking at a concerning rate.’
All four sectors of the PCI activity measurement index – house building, apartment, engineering and commercial – contracted in February.
Rates of decline for new orders in the house and apartment building sectors were the most marked since mid-2013, the PCI report said.
‘Residential building respondents to the Australian PCI mainly commented on slow market conditions due to soft new orders, tight lending conditions, falling prices and caution by prospective buyers,’ it said.
Australian Bureau of Statistics chief economist Bruce Hockman referred to the slowing pace of construction in comments following the release of ‘subdued’ GDP numbers on Wednesday.
He said approvals for dwelling construction indicated that the decline in dwelling investment would continue.
Ai Group analyst Peter Burn concurred.
‘With new orders also lower in February the construction downturn looks likely to continue over coming months,’ Mr Burn said.
The HIA warned the construction industry was now subject to the whims of the overall economy.
‘Residential building has been pivotal in driving activity in the rest of the economy for the past five years,’ Mr Devitt said.
‘Over the coming years as home building activity slows the sector will be reliant on the resilience of the broader economy.’