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Residential Construction Falls to 19 Year Lows

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Residential construction had the biggest annual fall in almost 19 years according to the latest data from the Australian Bureau of Statistics.

ABS March results showed work was down 12.5 per cent compared to last year, dropping for the seventh consecutive time at 1.6 per cent for the quarter.

NSW was the main drag on the data at -8.1 per cent in the quarter and -17.3 per cent over the year bearing the brunt of the summer bushfires compounded by Covid-19.

Although the drop in total construction work was only down 1 per cent in March or -6.5 per cent compared to 2019, it was only the beginning of a downward spiral according to experts.

The only beacon of hope for the construction industry was non-residential work which was trending upwards by 0.7 per cent for the quarter and 3.9 per cent due to on-going major infrastructure projects.

Related: Trades, Construction Needed to Prop Up Covid Economy


Residential Construction Work Done Quarterly: ABS

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Source: ABS, ANZ Research

Commsec senior economist Ryan Felsman said before the virus construction activity was weakening for two years particularly in NSW.

“Due to the slowdown in residential home building, moderation in non-mining infrastructure commencements, easing in population growth and bushfire disruptions,” Felsman said.

“But public transport infrastructure projects, focusing on roads, railways and airports continue to support broader construction activity.

“Even though the construction industry wasn’t subject to mandatory shutdown measures at the height of the virus crisis, builders and engineers have reported declines in building activity due to weaker demand. ”

BIS Oxford Economics senior economist Nicholas Fearnley said the full impact of Covid-19 was still on its way.

“Although Covid-related supply chain disruption may have weighed on activity, the majority of the decline reflects the downturn in dwelling approvals seen in 2018 and 2019,” Fernley said.

“The lag between the shift in sentiment caused by the pandemic [and its impact on the outlook for migration in particular] to dwelling approvals and work done will be at least six months, consequently we expect residential building activity to continue trending down well into 2021.”

Related: Falling Migration Will Slash Construction Demand by Half


ABS Construction Work Done, Australia, March 2020

Change in work doneTrend quarterlyTrend 2019-2020Seasonally adjusted quarterlySeasonally adjusted 2019-2020
Building-1.4%-6.3%-1.0%-8.0%
Residential-2.9%-12.3%-1.6%-12.5%
Non-residential0.7%3.9%--0.3%
Engineering-1.3%-4.8%-1.1%-4.4%
Total construction-1.4%-5.7%-1.0%-6.5%

Source: ABS

ANZ senior economist Catherine Birch said the overall fall in construction was smaller than expected and would detract from GDP growth this quarter, and next quarter would be worse.

“We think that the current decline in residential activity will be longer and deeper than previously expected,” Birch said.

For non-residential building, the dynamics differ by subsector: tourism and retail will likely be the weakest and offices will also face challenges, but the outlook for industrial appears more positive.”

“Infrastructure activity will likely be more resilient, especially now that we’re seeing funding announcements by all levels of government for new and fast-tracked projects.”

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Article originally posted at: https://www.theurbandeveloper.com/articles/biggest-annual-fall-in-residential-construction-in-19-years-abs