Home building still in the doldrums, but renos picking up: ABS

The Master Builders Association has called for further rate cuts following the release of ABS figures showing total seasonally adjusted residential building work done fell by 1.1% to $11.4 billion in the September 2011 quarter.

The figure would have been worse were it not for the value of major renovations work done growing by 0.9% over the September quarter to be up by 6.3% on the same quarter one year earlier.

Excluding renovations, new residential building work done fell by 1.5% to be down by 5.2% on the September 2010 quarter.

The biggest drop in new residential building work done occurred in South Australia, where the value of work fell by 15.5%, followed by Tasmania (12.1%), ACT (8.6%) and WA (6.3%).

New residential work done rose by 5.5% in New South Wales, 3.3% in Victoria and just 0.2% in Queensland, despite the $10,000 on offer as part of the state government’s building boost program.

MBA chief economist Peter Jones says the figures “confirm evidence from Master Builders’ latest survey showing dramatic turnaround in builder sentiment as commercial and residential building-related stimulus spending programs come to an end”.

“They also confirm that MBA information that builders are suffering a downturn in sales and enquiries.”

“The tough business environment is not being helped by volatility in the world economy and investor caution,” he says.

“A negative growth trend is firmly established in both the residential and commercial or non-residential building sectors, with no indication that conditions will turn around without policy change.”

Outside of residential building, construction work done surged by 12.5% for the quarter, to be 18.1% up from a year ago (inflation-adjusted).  This was the strongest quarterly construction growth rate since the commencement of this series in 1986.

Jones attributed this surge in construction activity to mega-mining projects ramping up, particularly in Western Australia during the September quarter and in Queensland the previous quarter.

“A sectoral divide has opened up in the building and construction industry, with booming engineering construction fed by the mining boom contrasting with a weak building sector caught in the slow lane of a post GFC economy struggling to transition to a private sector led recovery.”

“The 1.5% decline in new residential work done reflects a 2.6% decline in detached housing which was partially offset by a 3.4% increase in ‘other dwellings’,” noted HIA acting chief economist Andrew Harvey. 

“Today’s result suggests that new dwelling investment will detract from GDP growth in the September quarter national accounts, due for release in two weeks’ time,” he says. 

Westpac notes the two-speed nature of the economy, with construction work in the third quarter well in excess of expectations, private residential building activity flat, and public building and public infrastructure work declining. 

“For the RBA, from a policy perspective, the patchy conditions in the broader economy would remain a concern,” the bank says.