AUSTRALIA’S construction industry has stalled, which shows a high vulnerability to a hike in interest rate.

Just recently in the news, it has been shown in a report that Australia’s construction industry has shrunk for the 12th consecutive month.

According to a survey, house-building activity has fallen for the twelfth consecutive month and now is vulnerable to further interest rate hikes.

House builders look to be threatened with a hike in interest rates as its house-building activity has stalled.

Figures from the Australian Industry Group/Housing Industry Association Performance of Construction Index shows that it increased by a seasonally adjusted 1.7 points in May to 39.6, which is below the 50 line that separates expansion from contraction for the twelfth consecutive month.

Home builders have stopped constructing new houses as a drop in building approvals was observed in April recently.

Though an expected contraction in March quarter growth in Australia’s construction industry occurred, it is still lower than what is anticipated.

According to the Australian Industry group director, Peter Burn, a clear withdrawal of the stimulus measures related with the response to the global financial crisis has been observed over the 12 consecutive months.

Data show that a contraction of all four sub-sectors has occurred in May, also showing a significant drop in apartment building, which was down by 5.8 points at 25.3.

A faster contraction in commercial construction was also shown in the May report data. This contraction reflects the rolling back of fiscal stimulus and the lack of force from private investment in projects including offices and retail premises.

Cause of Shrinkage

According to the report, most companies linked the ongoing shrinking in Australia’s construction industry to the passive market demand, which is said to be due to the shortage of new work that would have replaced the decreasing level of school building projects.

The reduction of Australia’s construction industry growth is also associated with the widespread flooding over the summer.

An economist also said that the small and medium-sized businesses which are considered the life blood of the housing industry are hassled by the burden of high costs and slower demand.

With the recent slump in home building approvals on top of the ongoing struggles of Australian households on impending higher interest rates, Australians nowadays appear to have put on hold their plans of building or renovating their homes.

The private sector demand is said to have not gained strength sufficiently which is said to be held back by higher interest rates and vigilance.

With these reasons, an ongoing weakness is being demonstrated in both house building and commercial construction, while a recorded 13 months in a row of negative figures was seen in the apartment sub-sector

As a whole, the construction sector seems to remain to be highly susceptible to any further interest rate hikes, though the Reserve Bank of Australia (RBA) 4.75 per cent cash rate is not expected to rise at the next board meeting on June even though an expected contraction in March quarter growth occurred.

The central bank has hinted recently that the cash rate may be on its way up, but is expected widely not to raise the rate in June

The last month of the first quarter of 2011 has seen a rise in Australian residential building approvals of a seasonally adjusted 9.1 per cent to 13,627 units in March. This positive development is a sure step towards a positive improvement from an upwardly revised 12,492 units in February.

This means that house builders or home builders are now quite busy building display homes and have increased the number of house and land package available in the market.

Australian home builders are busy constructing units for sale in support with the increase in building approvals.

However, according to the Australian Bureau of Statistics (ABS) statement, despite the negative result over the previous year that is in March 2010, building approvals were still down by 18.1 per cent.

A significant or major indicator of where the economy in general is likely to go, the increase of number of building approvals is likely, but not certain, an indicator that the economy is heading towards a period of growth.

Building approvals is said to be a major indicator of where a country’s economy is likely to go but it is not a sure fire sign that a country’s economy is quite stable.

In February, the positive growth in activity came most particularly in non-housing, such as apartment blocks, with 5473 units started in March as compared to the 4233 units built in the month of February.

Though there is an increase in building approval, home starts remain sluggish. This slump in home starts from the previous month and over the year is said to be an indication of the continuing negative impact of last November’s increase of interest rate on potential home owners and the building industry.

In the month of March, home building saw a 8154 home starts which is a fall of 0.8 per cent as compared to 8258 home starts in the month of February and which is still said to be well below the 10,188 home starts in the month of March last year.

Though home builders are busy constructing and increasing the number of display houses for sale showcases; however, house prices are still up indicating the housing market has become soft.

Bed Deda, St George Bank chief economist, said in a statement that though for the month of March, the building approval numbers were strong; however, the housing sector is still experiencing some soft conditions more generally.

Bed deda explained that there is clearly an underlying demand for the construction side of the property market which should support building approvals; however, in general, house prices are coming off as well as in some areas of house finance.

With the increase in building approvals, house builders are now quite busy building house units in support of these increased building approvals.

Potential Australian home plans buyers should expect to see a wide range of house and land package and display homes units in their area for home builders are quite busy in building these units in support of the increased building approvals.

The increased building approvals are really a positive development for house builders and potential home owners alike.

According to Economic forecaster BIS Shrapnel, a surge of 25 percent in the activity of civil construction will be observed over the next three years. This increase in activity is due to flood reconstruction as well as mining and LNG-related work. This is projected to result for the first time in overall activity breaching $100 billion in 2014.

Construction activity would rise up by 20 percent in 2011-12 and 2012-2013, in contrast to the weaker growth of 2.8 per cent in 2009-10 and a forecast 5 per cent for 2010-11, as projects are nearing to completion after the global financial crisis as reported by BIS Shrapnel yesterday.

Adrian Hart, senior manager for the forecaster’s infrastructure and mining unit, said that owing to delays in the next round of mining-related works as well as the conclusion of existing projects, growth over the past two years had been restrained.

However, Hart relayed that the outlook for civil construction has now become generally positive, due to the large mining and energy projects spanning LNG and coal and iron ore are now approved and starting to build momentum

Motivated by the vast LNG projects in Queensland and WA, in addition to large coal and iron ore expansion projects, BIS Shrapnel has forecasted that yearly mining-related civil construction, including mines, railways, ports, and other mining infrastructure, will virtually double between 2010 and 2014 to about $57 billion.

According to BIS, over the subsequent four years activity intensity in Queensland would pick up by 50 per cent. Home builders will now experience a rise in their construction activities. This is good news to house builders for this increase in construction activity would also affect them.

However, WA, was only projected to experience a even growth in engineering construction in 2011-12, due to projects such as Sino iron ore, Pluto LNG, and the Worsley alumina refinery expansion came to a close, compensating a raise-up of the Gorgon LNG project.
As LNG and iron-ore expansions peaked, the outlook for the 2012-14 period will be much stronger.
According to BIS Shrapnel, work on non-mining civil infrastructure, excluding telecommunications, railways and electricity, would decrease to $46billion over the subsequent four years which will be due to the tightening of government spending.

Mr. Hart relayed that work funded by the public sector motivated mainly by Queensland reconstruction efforts would increase a bit in 2011-12. He also observed that since 2000, public sector-funded civil work has in fact doubled, from around $15billion to $20billion a year in the early 2000s to around $30billion during 2009-10. Thus, causing before a period of under-investment in infrastructure to one where we are now adding to the net capital stock. However, Mr. Hart also added that can’t expect these levels of heightened increase levels of activity to be sustained, even though there remains much to do.

According to BIS Shrapnel, this made the civil work outlook very dissimilar to the pre-GFC period, when both public and private funding for civil work was flourishing at the same time.

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The Urban Development Institute of Australia reported that about 8000 jobs were lost in the construction sector for the last three months due to floods, cyclones, and record-low housing approvals.

Houses in Brisbane which are median-priced cost an excess of $ 102,554 more than what an average wage of a family can afford. These numbers reflect a bad prognosis ahead due to Premier’s delayed Building Revival Forum this coming April 12, at which the construction sector depends on this to help the home builders survive from this turmoil.

UDIA Queensland president Warren Harris said the forum was trying to find ways to revive this falling sector since it has been losing more than 17,000 full-time jobs from August 2008.

Mr. Harris claimed that there has been a decline in construction activity in Cairns, the Sunshine Coast, Darling Downs, and Wide Bay Burnett regions and also other localities covered by Queensland.

He further said that we already know the most recent updates in the house builders’ activity and this is enough proof that there should be effective solutions in order to have good outcomes in solving these problems.

He also admitted that Queensland has had the worst days with their building industry since 2008 when GFC struck its force on them.

The year 2011 would have offered a better and promising future for the building industry as compared to the last two years, but then the approval numbers dropped from 32 percent to 28 percent in January as ABS records go large merely because of the recent flooding. And the natural disaster which happened just recently has led to the loss of nearly 8000 jobs.

This effect was felt more in the far north since one of the largest home builder, namely Glenwood Homes, fell off with debts totalling $ 30 million dollars. This company was founded by Udo Jattke, a German born lad who was once worth a mere $ 300 million but then his company was forced to lose 24 staffs with many houses half built.

Another company that was stricken by such downfall and hit hard at that is the Normad Building Solutions which is a regional modular house builder.

Chief executive Brett McDonald said issues like the flood in Queensland and Earthquake in Japan, though happened from afar, still made an effect to the finalization of deals and agreement for the different building projects.

He admitted that it is just but a tough time for everyone, home builders and buyers alike. For home builders, it is tough since the buyers are already hesitant to buy new houses for sale. It is tough for the buyers since they are also affected with what’s happening with the environment which makes them unable to decide whether to commit in buying a house.

Mr McDonald said he hoped that the forum would look and tackle at extending the regional first-home buyer’s grant and also, it should focus on government agency decentralisation.

It comes as Master Builders Queensland pushed insurance firms to employ local tradesmen in the disaster recovery and restoration of Queensland. It was then observed that there was an increasing number of interstate workers getting clean-up jobs. At least for now, some of the people who lost their jobs may find other means to get by and survive this drought. Because sunny days will come again soon, they will always keep on hoping that things will be alright soon.

Australia has hit the lowest residential property sales last year for the decade. But still houses for sale in Australia still continued on its marketing. Home builders still continued with its productions and renovations.

Though homes for sale will not be expected to have price increase, it is expected and noted to have an increase regarding its sales.

According to a property research company, it is optimistic to say that this year, the housing finance commitments have increased and improved as compared to last year which was twenty percent below average. Unemployment is already at five per cent. Wages increased above the inflation but property values are stagnant; thus, people are set to afford to buy new houses for sale.

The latest Property Pulse noted that it is but expected that improvements will be noted after the weakest year for sales. The residential market, which can also be referred to as the buyer’s market, will have to accept that capital growth may dwell for the long haul.

Thus, for valuer, Herron Todd White, he advised people with self-managed huge funds to save their money for a 15 to 20 year period.

HTW commented on the Sydney residential market and said that we can expect potential higher returns for units with good returns.

He advised that potential buyers should look for locations which have started to have growing infrastructures and are still a growing population. And above all, it should be near the city. Suggested locations include Top Ryde, Meadowbank, Hornsby and Waitara.

With increasing population and congestion coupled with increasing fuel prices, it is but important to look for a place where there is accessible public transport.

HTW asserted that in the east of Sydney namely Darlinghurst and its nearby Potts Point, they offer affordable and well- located apartments known for its consistent rental returns.

HTW says that a typical, modernized studio worth about $300,000 can be rented for $400 plus weekly.

Most studio apartments have internal floor areas below 50 square meters at which lenders tend to impose restrictions. Thus, buyers who would like to buy studio apartments at this size should check first the lending standards and credit restrictions.

If you want homes for sale which cost a mere $500,000 to $800,000 range, then one will have to choose the units from Neutral Bay and Cremome.

For older style complexes with newly renovated two-bedroom units with parking lot, they usually cost $ 550,000 but with great potential for capital and rental growth. And for those units with an added scenic view on their units, each unit would cost $700,000.

Because of many people going in and out of Canberra, it is consistent with its returns.

For those units near the city and universities, they also show good rental returns year after year and middle range properties would expect to have a 5 percent return.

Other places that will have potential returns are Gungahlin and Tuggeranong. These two are suburbs which may gain returns in the future.

Due to the many workers coming in and going out of the country, most of them will have to rent apartment units. Thus, it is foreseeable that rental returns would be high and vacancy rates would decline.

Building homes has been the business of many Australians. People have acquired houses for their families because of these humble house builders. Affordable, durable, intricately-designed, and homey structures have been built. The home builders, themselves, are also as satisfied because they are being covered by their insurance. With insurance, home builders are confident that whatever incidents may occur, he can seek medical attention and have the means to acquire such medical attention.

However, the Australia home builders do not find the industry to be always lucrative. There are times when they do not get the kind of protection that they need. Today, this is really happening. Home builders now find it hard to get insurance companies to cover them. Recently, insurers have pulled out believing that the business is not profitable enough. If this goes on, what will become of the house builders? And this is seen to have a ripple effect. What will then be the effect on the rest of the Australians who want to have their dream houses?

Problems in every industry are inevitable. They are naturally occurring. This particular situation among Australia home builders may be a natural occurrence. But the impact it has is not something that should be put aside. Home builders are relying on insurance companies to cover them for whatever incidents that may occur while they are at work. Building houses is such a hazardous job and house builders definitely need insurance.

Here starts the problem. Home builders need protection from accidents. This is why they turn to insurance companies to buy premiums. However, just this year, a number of insurance companies have pulled out their investments because they do not find it profitable enough anymore. One home builder has 38 projects pending in Karratha. However, he cannot get insurance from the remaining insurance companies. When these home builders do not get insured, they cannot work on their projects. And if this happens, many people will suffer. For one, the families of these home builders will experience financial difficulties. Since there are no more housing projects, the income of the family will be lessened. In effect, everyone will find himself needing to adjust. Secondly, Australians who want to have their houses built will find difficulty looking for house builders. And since building houses will lessen, the income of hardware stores will also go down. The demand for construction materials will also follow. Eventually, this will affect the national economy.

What can the government do in order to help the Australia home builders? It has the power to remove mandatory indemnity insurance which is the insurance needed by house builders. This would mean that even if they do not have insurance coverage, they can still pursue their projects. A second thing that may be done is for the government to convince insurance companies to take on homes builders. After all, these Australia home builders can afford to pay their premiums.

If this problem is not taken care of, the effects will surely be widespread.

Now that you are planning to change your house plans and makes it more beautiful, you need to start thinking for your new house designs and start to look for the best home builders in town. However make sure to think carefully before hiring a home builder, as every new homeowner’s nightmare is to come across inconvenience and problems that possibly will have been avoided if they had taken the time to look into and ask questions before signing contract with the home builder.

Before signing a contract with your home builder make sure that they are registered, qualified and certified. Keep away from and avoid wasted time investigating builders if you’re hesitant of their qualifications in the first place. Once the home builder’s qualifications are confirmed, find a good home builder’s questionnaire or interview checklist and use it. Basic question and information asking like what location, price range, and material the home builder specializes just to make sure that the home builder’s knowledge and skills match your needs. This way you get the assurance that your house design will build the way that you like it. Ask them also how long they are in home designs and building business, the longevity of a company is very important since it reflects the quality of their works and their happy customers that is why they are still in the business.

Ask their previous clients and customers know the nature of how they worked their professionalism and etc. The input of these previous customers will certainly help you decide if this home builder is qualified.

Do not forget also to review the inspection and building authorizes records for previous homes built by the contractor. Before signing the contract, run through carefully the documents that you are signing on, there are lots of people who are too lazy to read when they see long written documents. Keep in mind that before signing, you need to know and read carefully as you don’t want to regrets something in the future.

Home is one of the most important things in a person’s life and when they are planning house plans designs they want it to be perfect. However, one of the biggest mistakes among home owners is the search for a good home builder that they have no idea and where to find the best one.  A lot of possible homeowners are left with a hole dug in the ground and no home because they did not ask the right questions to their home builders when starting their projects. If you are planning to have new home designs, make sure to do a research first and ask the most important questions before hiring a new home builder.

You can actually ask a possible home builder if their company have a website. A website is a lot of advantage since it will give you an idea of the company you are hiring, and examples of the quality and value of homes the builder has worked on based on the pictures up. However, the picture doesn’t say everything; make sure to contact them personally so you don’t have regrets at the end. You can ask them if home building is their profession or this is just what they do with their spare time. Choose home builders who are designing houses and home building are their profession, this way you will certainly make the best out of it.

Ask the home builders how long they are in the business, how many clients they have. This is an appropriate question to ask in order to know the skills and capability of a home builder. Check if they have some references or better yet ask personally the previous clients they have. This is very important to ask because you want to know what history the builder has with past customers.

There are so many new homes for sale and house plans and designs  nowadays that it can be tough to choose the best one. To add to the list of confusing choices, there are so many new home builders that it can be hard to know which one will be best for your dream home. If you want to get the best dream house you can possibly have, then you should make these decisions carefully.

When choosing your house plans and designs you should firstly think about your real estate property. The size of your property will determine what type of design house you should build. It simply will not be convenient to get a home with a lawn or garden if you have limited space in your real estate property. The amount of land will be crucial to the size of your home.

Another thing you should consider is the location of your home. Factors such as temperature should also be considered when choosing a design homes. If you live in a humid place, you should build a home with many windows so it is airier. Shade will also be important in sunny places, so your windows should be designed for this task. This will make your house more at ease and it can be a comfortable place to live in. However, for homes which are located in a colder location, insulation will be very important. You want to keep your house warm during cold winters. Thick walls are especially advisable for these homes.

Choosing a home builder will also depend on the design of your home. Consider the specialty of your home builder. Look for a home builder that is easy to work with, and can follow directions very well. It is also important that your home builders have suggestions that you can consider for the betterment of your dream home.

Display Houses offers the real estate for sale in Australia and you can check out their site and look for more information. Goodluck with your house hunting!