Builders expect activity to slow in next six months

Residential and commercial builders expect overall industry activity to be lower over the next six months relative to the past six months.

Builders expect industry activity and profits to fall and jobs may go, according to Master Builders Australia’s September quarter 2011 national survey.

Given the building and construction industry has lost the cushioning effect of government stimulus programs, there had been a worrying deterioration in business conditions that builders operating in both commercial and residential building are now facing, according to Master Builders Australia chief economist Peter Jones.

“Builders report a worsening in own business conditions and outlook, with private sector demand failing to pick up and fill the gap left as Building the Education Revolution, Social Housing and other government stimulus programs end.

“The building and construction industry has lost the cushioning effect of government stimulus programs whilst the credit squeeze and other regulatory constraints continue to affect business operating conditions,” Jones says.

“Non-residential or commercial builders, already experiencing poor conditions, face the prospect of falling activity, with conditions in residential building now also expected to deteriorate.”

“With activity and profits under pressure, it is little surprise that builders have indicated that they will be looking carefully at workforce levels in the period ahead.”

“Large parts of the building and construction industry are doing it tough, and the Reserve Bank should consider cutting rates or at the very least keeping interest rates on hold until a private sector recovery is able to gain momentum.”

The report notes the residential sector index fell sharply in the September quarter and is now close to levels reached during the global financial crisis.

Although more than three-quarters of respondents are not looking to change apprentice numbers, more builders are saying they will release apprentices.

Financial constraints remain operative for builders, with negative effects increasing again in the September quarter after some easing in the previous four quarters.

About 30% of respondents were concerned that availability of finance was having a major/large constraining effect on their businesses.

This compares with about  5% or 6% before the global financial crisis.