Building Activity Set to Improve but Rate Rise Threatens Outlook
Master Builders Australia, 28 March 2007
Building activity appears set to improve although the outlook remains clouded whilst there is continued speculation about another rate hike, according to the latest Master Builders Australia National Survey of Building and Construction.
The March quarter survey reveals that builders are becoming more positive about the outlook for residential activity and that conditions in the non-residential sector are expected to remain strong.
Master Builders Australia’s Chief Economist, Peter Jones, said, “After a long period of underperformance due to the severity of the downturn in residential building, the trend in New South Wales builder activity appears to be at least stabilising, in line with the national trend.”
He said, “This positive momentum would be set back if rates were to move higher and the Reserve Bank needs to be cautious as they consider interest rates next week.”
“Builders now expect residential activity to improve over the next six months despite lingering concerns about housing affordability and other constraints on business activity.”
“In the March Quarter, over half the builders said they expected housing affordability to deteriorate over the next 12 months and builders also expressed concerns about the development/planning approval process, particularly in relation to delays in granting approvals.”
“In terms of constraints, the March Quarter Survey confirms that industrial relations is not a major issue having fallen sharply over the past 12 months, demonstrating that the WorkChoices reforms have had a significant impact on the building industry,” Mr Jones concluded.
Other key findings of the March Quarter Survey are:
• Builders’ own business activity rose in the March quarter and though well down on the peak in 2004, builders still perceive their current activity to be good.
• Builders expect own business levels of activity to improve over the next 6 months.
• Business profits remain strongly positive and there is optimism about where profits are headed.
• Builders still have a healthy backlog of work on their books although the index for display centre traffic/enquiries fell back in the March quarter.
• Builders expect interest rates to rise moderately over the next 12 months although the index fell back again in the March quarter.
For further information contact:
Peter Jones, Chief Economist (02) 6202 8888, Mobile: 0403 440 838
The full survey is available at www.masterbuilders.com.au