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Building booms across many sectors

On Oct 14 2014
Tagged as:
  • Commercial Property


There are numerous indicators of strength in the housing industry, and one strong signal of future ...

There are numerous indicators of strength in the housing industry, and one strong signal of future growth in the real estate market is construction levels. 

The Australian Industry Group (AIG) and Housing Industry Association (HIA) have released their Australian Performance of Construction Index, which has shown that building increased by 4.1 points, reaching 59.1 on the September index. 

Readings above 50 show a rise in construction, and the level above 50 is how strong the rise is. This 59.1 reading is the fastest rate of construction expansion recorded in the nine years since the survey commenced. 

House and apartment building led the way in building strength, with index ratings of 61.7 and 60.9 respectively. While commercial construction also grew, there was a fall in building in the engineering sector - however, the rate of decline in this sub-sector has slowed down. 

Director of Public Policy for the AIG Peter Burn says the positive growth for residential property construction is a great sign for the rest of the year, further bolstered by new requests for construction and an increase in employment across the sector. 

However, he was concerned about skills shortages in construction, which could be indicated by an increase in the rate of wages growth. 

Overall, the AIG and HIA survey suggests that anyone interested in residential or commercial property should be able to find a lot to suit their needs over the coming months. 

How long does construction strength last? 

Chief Economist for the HIA Harley Dale also thinks the strength will continue through the rest of the 2014-2015 financial year. He is pleased to see commercial construction following the boosts in residential, but is concerned about some lending practices hampering growth in the future. 

Mr Dale also noted in a separate HIA release that home financing rose through August, showing that demand continues to meet the increased spring supply. This isn't just impressive on a 2014 level but also on a historical basis - Dale also commented that "excluding the GFC-stimulus period of late 2009, the numbers we have seen over the June - August period this year are the highest since the building boom of 1994."

For the month of August, new home lending experienced strong increases in both South Australia and Tasmania, while the number of loans decreased for NSW and Queensland.

Despite this monthly drop, the historic highs in new home lending are a strong indicator of a healthy property market. With both commercial and residential construction increasing, now may be an excellent time to talk to a real estate agent about a new purchase.