Housing leads February building blitz

Home buyers and renters will benefit from the recent rise in house building activities, with high activity levels expected to push rental and house prices down.

The overall Australian Performance of Construction Index (PCI), measured each month by the Australian Industry (Ai) Group and Housing Industry Association (HIA), has increased by 1.7 points in February to 56.0, thanks largely to a massive jump in house building activities – up 9.8 points to 61.8.

Readings above 50 mean expansion in activity, with the distance from 50 indicating the strength of the increase or decrease.

Aside from house building, all other construction sub sectors including commercial, engineering and apartment also recorded expansions.

Engineering construction is continuing its upward climb (up one point to 54.5) as infrastructure projects around the country, ie the Metro Rail Tunnel in Melbourne and NorthConnex and WestConnex motorways in Sydney gain momentum.

Apartment building, which drifted into negative expansion territory late last year, is recording healthy growth following broadly stable conditions over the previous two months (up 6.2 points to 56.9).

“Pent-up demand for new housing is continuing to absorb record levels of new dwellings and a new phase of apartment construction is getting underway,” says HIA Principal Economist, Tim Reardon.

“A considerable proportion of these new apartments have been delivered onto the rental market – helping to bring rental inflation to a 24-year low.

“This is good news for those who rent rather than own their homes.”

Strong growth across the other sub-indexes including new orders, employment, wages and selling prices also contribute to the overall robust conditions of the construction sector.

“Employment growth was particularly healthy, pointing to employer confidence in the strength of the pipeline of work on their order books,” says Ai Group Head of Policy, Peter Burn.

“High activity levels did not translate into higher margins, with selling prices rising by less than costs led by price rises for energy and construction materials,” he explains.

“Wages growth appears to be strengthening at a still-moderate pace and this is reinforcing the willingness of employers to take on more staff.”