New home sales point to healthy year for construction down under

Elizabeth Bay, Sydney Photo: Wrumsby

Sales of new homes in Australia are pointing to a healthy year for the industry, as construction activity rebounds into growth.

A survey of Australia’s largest volume builders by the Housing Industry Association showed a modest decline in July 2015. Transactions dipped 1.8 per cent in July 2015, but HIA Chief Economist Harley Dale says that they remain in "strong shape", with the cyclical peak for total new home sales occurring in April and the subsequent downward trend considered "very mild".

"Key leading indicators of home building, including HIA New Home Sales, suggest little prospect for further growth in new home construction in 2015/16," Dale adds. "However, following three consecutive years of strong growth which has propped up the domestic economy considerably, [HIA New Home Sales] signal another healthy year for new home construction in 2015/16."

The positive outlook is echoed by the figures from the Australian Industry Group's Performance of Construction Index, which shows that the national construction industry expanded in August after declining or remaining stable over the previous nine months.

Apartment building was the strongest performer, if at a slower pace than
July’s 11-month high (down 3.3 points). House building also expanded (up 4.4 points) after stabilising in July, while commercial construction expanded solidly (up 9.4 points) after nine months in contraction. In contrast, engineering construction remained in negative territory for a 14th month (up 2.9 points) amid the ongoing decline in mining-related investment.

Ai Group Head of Policy, Peter Burn, comments: "Continued strength in the residential sub-sectors and a lift in conditions in commercial construction underwrote the welcome return to expansion in the national construction sector during August. The positive news from these sub-sectors was sufficiently strong to outweigh the entrenched contraction in engineering construction associated with the winding-down in mining-related projects."

"Conditions in commercial construction are likely to be critical to the strength of the overall construction industry in coming months," he adds, with residential building already at high levels and weakness in engineering construction "likely to continue for some time".