4th April, 2014

Residential construction recovery continues

Residential construction continued to enjoy growth in February, new figures have confirmed.

The Australian Bureau of Statistics revealed that the number of dwellings approved rose 0.7 per cent in trend terms during the month, making it the 26th consecutive month of gains.

The ACT saw the highest proportion of growth at 7.9 per cent, while Victoria and Western Australia performed well at 2.2 and 2.1 per cent respectively.

Tasmania (1 per cent) and South Australia (0.4 per cent) also improved, although the Northern Territory slumped 20.8 per cent. Queensland and New South Wales experienced slight falls, dropping 1.2 per cent and 0.2 per cent.

Overall, the value of total buildings approved edged forward 0.2 per cent in February and has increased for eight consecutive months. Residential building value climbed 0.2 per cent, while non-residential projects were worth 0.3 per cent more, in trend terms.

Peter Jones, Master Builders Australia (MBA) chief economist, said the industry is "cautiously optimistic" about residential approval figures.

He remarked: "The positive trend remains encouraging with dwelling approvals up 23.2 per cent through the year."

The data may encourage more industry organisations to review their existing construction and tradies insurance in anticipation of larger and more lucrative projects in the future.

However, Mr Jones did warn that solid growth in residential approvals has not quite filled the gap left by falls in mining-relating engineering construction. He also noted that official monthly figures continue to show marked volatility across different building sectors. 

"Business confidence remains the X-factor, particularly in non-residential building, which the government must address in the May Budget," he explained.

"It is important that building approvals continue to strengthen in [the] coming months to exert downward pressure on house prices by overcoming the undersupply of housing."

Author: Murray Bruce