Building activity drops by 3.4 per cent

25 May 2011

The real value of Australias building activity has contracted for the third successive quarter, with a 3.4 per cent seasonally adjusted drop in the three months to March, according to todays figures from the Australian Bureau of Statistics. The biggest seasonally adjusted declines were in South Australia (9.7 per cent), Queensland (7.7 per cent) and Western Australia (3.1 per cent). More modest falls were seen in NSW (2.6 per cent) and Victoria (0.7 per cent). Tasmania actually saw a 2.4 per cent increase in the value of its building activity.


The Urban Taskforces chief executive, Aaron Gadiel, said the main cause of the decline was a 3 per cent seasonally adjusted drop off in non-residential building by the private sector, accompanied by a lack of growth in the value of new house construction.


The sector enjoying the greatest buoyancy is medium and high density home construction which soared by 5.6 per cent in seasonally adjusted terms, its strongest quarter since June 2010, Mr Gadiel said.


The big lift in medium and high density construction is largely based in Victoria – 16.6 per cent – while NSW saw only the most modest gains – 0.6 per cent.


Queensland saw another fall – 10.1 per cent – in the value of its medium and high density construction. Mr Gadiel said that the value of new detached house construction in NSW jumped by 13.2 in NSW, compared with falls in Victoria (5.1 per cent) and Queensland (2.2 per cent).


NSWs better performance in relation to new houses follows a relatively weak December quarter, Mr Gadiel said.


NSW is also coming off a very low base – it accounts for 21 per cent of new residential development, but 32 per cent of the national population.


Mr Gadiel said that non-residential building by the private sector suffered big falls in Western Australia (10.7 per cent), Queensland (9.9 per cent) and South Australia (10.2 per cent).


Victoria also fell by 4 per cent, while NSW bucked the trend with a modest rise of 1.7 per cent.


Mr Gadiel said the challenges facing the industry were clear.


The industrys difficulties all come back to higher interest rates, difficulties in securing bank finance for developers, restrictive planning laws and punitive development levies, he said.


If governments are serious about improving our urban environment, they will need to work hard on new policies to address these issues.


Please note: A table comparing the relative performance of each state is in the PDF below.

The Urban Taskforce is a property development industry group, representing Australias most prominent property developers and equity financiers.


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