Construction sentiment improving but not yet activity: Master Builders survey

Home builders and contractors expect the building industry to improve in the medium term, but are still struggling in the short term, according to the latest quarterly Master Builders National Survey of Building and Construction.

The overall  index rose above the neutral 50 mark over the March quarter, indicating that builders believe their own business activity will improve over the next six months.

But current conditions remain weak.

Own business profitability rose slightly in the March quarter but the index remains well below the neutral 50 mark.

Master Builders notes that "it may be some time before industry profitability improves".

"The index is showing signs of bottoming following a trend decline in the index over the past two years to levels below that recorded during the global financial crisis," says Master Builders.

The “key forward indicator” index for display centre traffic/commercial enquiries rose markedly in the March quarter.

Although remaining below the neutral 50 mark, the index is now higher than the average reading recorded during the past nine years.

Master Builders says the improvement in this index “may be another sign that the market is finally responding to lower interest rates and that the worst may be behind the building industry”.

The results are based on a survey of more than 500 builders and contractors. 

Peter Jones, chief economist of Master Builders Australia, says while signs of a recovery may be beginning to emerge for the industry, the upswing is coming from a very low base and questions remain about its strength.

“The turnaround in the survey sentiment suggests previous interest rate cuts may be beginning to take hold, but builders are yet to see any benefit from the rate reductions.

“Builders reported less work on the books than in the previous quarter, sales contracts remained essentially unchanged and profits remain weak.

“The good news for builders came in some of the industry’s forward indicators. Display centre traffic and commercial enquiries increased markedly in the quarter and are now higher than the average reading recorded over the past nine years.

“Expectations for industry activity and own business activity also rose to levels above the survey’s neutral reading, which suggests there could be improvement for the industry in the short to medium term,” he says.