March 09, 2011 – According to a recent report, despite tight credit conditions, weaker demand and higher interest rates, Australian construction is still being done. But then it shows signs of getting slow in the month of February.
The Australian Industry Group-Housing Industry Association’s performance of construction index (PCI) rose from 4.4 index points to 44.6 points in February but this measurement hasn’t reached the 50 point level expansion from contraction.
The last time construction activity expanded in Australia was in May 2010. Some businesses noted that their declines in construction activity may be due to lesser demand, tight credit conditions, and less school building projects. House builders on the other hand cited the impact of higher interest rates and diminishing confidence of buyers.
Among the four major industry sub-sectors, the housing, apartments, and commercial sectors experienced a contraction in construction activity. Although, the engineering sector has gained 13.3 index points to 52 points due increase in demand; thus, acquiring new orders.
Australian Industry Group director of public policy, Peter Burn, optimistically said that activity in the other sub-sectors may improve in the months ahead hopefully. Since the engineering sector has expanded and also the apartment and commercial construction may have declined, its pace of decline has slowed so there is a great chance for it to recover.
Housing Industry Association senior economist Andrew Harvey said the PCI report noted considerable weakness in the residential building sector.
Mr Harvey noted the Australian Bureau of Statistics’ figures showed that total housing approvals fell and that there is a need to reform the supply side of the housing market. Mr.Harvey pointed out that this reform should include the removal of stamp duties on new homes and a quicker land release process. Because if this reform will not be done, the families concerned will continue to be pressured regarding higher house prices and rents. They may end up losing their confidence in buying a house and as result will affect the housing market.
