##{"id":58640,"date":"2011-08-08T13:42:15","date_gmt":"2011-08-08T03:42:15","guid":{"rendered":"http:\/\/www.fnarena.com\/index.php\/2011\/08\/08\/oz-residential-construction-improvement-not-expected-until-201213\/"},"modified":"2011-08-08T13:42:15","modified_gmt":"2011-08-08T03:42:15","slug":"oz-residential-construction-improvement-not-expected-until-201213","status":"publish","type":"post","link":"https:\/\/staging.fnarena.com\/index.php\/2011\/08\/08\/oz-residential-construction-improvement-not-expected-until-201213\/","title":{"rendered":"Oz Residential Construction Improvement Not Expected Until 2012\/13"},"content":{"rendered":"

\n\t– BIS<\/span> Shrapnel releases Building In Australia 2011 <\/em>report
\n\t– Oz building commencements tipped to recover from 2011\/12
\n\t– Commercial and industrial building the key driver
\n\t– Residential construction improvement not expected until 2012\/13<\/strong><\/p>\n

\n\tBy Chris Shaw<\/p>\n

\n\tThe Australian housing market has seen limited activity with respects to dwelling starts in recent months, but the outlook for building construction overall is not all bad according to BIS<\/span> Shrapnel's Building in Australia 2011 <\/em>report. The report suggests the market will see a moderate recovery in building commencements from 2011\/12.<\/p>\n

\n\tThe recovery will follow an estimated 12% decline in 2010\/11, which BIS<\/span> attributes almost entirely to the winding down of the construction related “Building Education Revolution” program. The fall-off from the end of this program is expected to more than offset an emerging recovery in commercial and industrial building.<\/p>\n

\n\tIt is this recovery in commercial and industrial building BIS<\/span> managing direction Robert Mellor<\/span> expects will be a key driver in any improvement in building commencements in 2011\/12. Also important will be increased construction in the health care sector.<\/p>\n

\n\tAs Mellor<\/span> points out, improvements in the Australian economy since the GFC<\/span> have created a more conducive environment for commercial and industrial development. As well, $7 billion in new hospitals and other health care facilities are due to commence in 2011\/12.<\/p>\n

\n\tMellor<\/span> expects residential building will make only a minimal contribution in 2011\/12, due largely to a decline in activity following the expiry of the First Home Owner's Grant Boost Scheme. There will also be a winding down of public housing stimulus by the Federal Government.<\/p>\n

\n\tWhile first home building will decline, Mellor<\/span> expects a healthy rise in multi-unit residential starts, which reflects an improved financial environment allowing developers to better fund new apartment projects.<\/p>\n

\n\tResidential dwelling construction is expected to improve in 2012\/13 on the back of improved economic growth through 2011\/12 and higher overseas migration in response to increasing labour<\/span> requirements. What should also drive the dwelling construction market in Mellor's<\/span> view is activity is well below underlying demand nationally. These shortfalls are most apparent in the Queensland, Western Australian and New South Wales markets.<\/p>\n

\n\tWhile BIS<\/span> Shrapnel is forecasting two interest rate rises in 2011\/12, which would take the variable rate to 8.2% by next June, Mellor<\/span> suggests accelerating economic growth should continue to support a rise in residential demand. This should be most pronounced in those states where the shortfalls mean pent up demand pressures are emerging.<\/p>\n

\n\tBy 2012\/13 Mellor<\/span> expects the value of new residential building commenced should have increased by as much as 10%. These gains should be relatively equal across new houses and multi-unit dwellings, with the upturn to be concentrated in Queensland, WA and New South Wales.<\/p>\n

\n\tMellor<\/span> sees these three markets as experiencing a rapid rise in dwelling deficiency, while activity is also likely to pick up given affordability has improved following solid income growth and weak price gains in recent years.<\/p>\n

\n\tAny improvement in residential building should be short-lived in Mellor's<\/span> view, as a ramping-up of resource sector investment and a subsequent skills shortage should drive up wage cost inflation. This should see the Reserve Bank of Australia turn more aggressive with respect to interest rates in 2013, BIS<\/span> forecasting a peak in the variable rate of 9.4% in the second half of that year.<\/p>\n

\n\tThis will impact on affordability, so creating a downturn in residential construction before any upturn can fully play out. An ensuing economic downturn expected by BIS<\/span> will see the value of residential building starts decline by 15% over 2013\/14 and 2014\/15 according to Mellor<\/span>.<\/p>\n

\n\tAny such downturn is likely to result in a substantial underlying deficiency of dwellings in most states, while Mellor<\/span> sees prices in most states also declining in real terms. This will bring about a subsequent improvement in affordability.<\/p>\n

\n\tDuring this period Mellor<\/span> sees only moderate performance from the non-residential building sector and an easing in engineering construction building as mining investment projects are completed. This should free up capacity for residential construction into the next cycle, so new dwelling construction is forecast to reach a higher level from 2016.<\/p>\n

\n\tIn terms of state-by-state performance, Mellor<\/span> is forecasting 15% growth in total building commencements in New South Wales in 2011\/12, following by 14% growth in 2012\/13. Residential construction growth should be very strong over these years.<\/p>\n

\n\tVictoria in contrast is expected to record moderate declines in total building construction over the next two years, with both the residential and non-residential sectors expected to contract slightly. In Queensland 2011\/12 should be fairly flat, before growth of 16% in 2012\/13 as a sharp rise in residential construction kicks in.<\/p>\n

\n\tIn the South Australian market total building commencements are forecast to increase by 45% in 2011\/12 given a rise in health sector building, before commencements decline by 32% in 2012\/13 as projects are completed.<\/p>\n

\n\tMellor<\/span> is forecasting a 28% rise in total building construction in WA for 2011\/12 thanks primarily to activity in the non-residential sector, before a 5% decline in 2012\/13. Tasmania is expected to deliver weak results in both years, BIS<\/span> forecasting declines of 4% and 23% respectively as both residential and non-residential construction activity levels fall.<\/p>\n

\n\tFor the Northern Territory Mellor<\/span> expects total construction growth of 24% this year given a rise in building in the social and institutional sectors, then a decline of 3% in 2012\/13. In the ACT, total building commencements should weaken by 31% in 2011\/12 given a correction in residential construction activity following a strong 2010\/11. In 2012\/13 Mellor<\/span> expects the ACT market will record an increase of just 1%.
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