Residential construction activity in NSW is showing early signs of a long-overdue revival according to data released this week by the Australian Bureau of Statistics.
The value of residential building approvals for the month of April rose by 30% compared to that recorded for the previous month.
Dr. Andrew Wilson, Senior Economist at Rider Levett Bucknall commented, "Reflecting the impact of the First Home Owners Scheme, the number of new private sector houses approved for construction in NSW rose by 12.6% in the month. This was encouragingly the fourth consecutive monthly rise in new private sector houses approvals. Although residential activity levels are still well below the peaks of previous years signs of a sustained upswing may be emerging."
Dr Wilson continued, "The April data also revealed a significant monthly rise in building approvals for unit and apartment building. The number of units approved rose from an admittedly low base of 224 in March to a nonetheless healthy 686 in April. Of these approvals, 586 were designated for high-rise structures four storeys and above indicating perhaps emerging developer confidence in larger scale residential developments."
NSW also had the distinction of being the best performed State in terms of monthly growth in residential construction activity, although in respect of new houses, Australia's most populous state still lags behind Victoria, Queensland and Western Australia in actual numbers approved.
Although glimmers of hope are emerging for the house building industry, non-residential construction activity in NSW remains in virtual freefall. ABS monthly approval data for April reveals that commercial and industrial construction levels recorded so far for this year are 58.8% and 37.2% respectively below the levels for the same period last year. The moribund state of non-residential construction reflects the dismal business investment data contained in ABS National Accounts figures also released this week.
A key question emerges from the apparent disparity of activity growth in the residential and non-residential construction sectors. Will a sustained recovery in residential construction - notwithstanding the winding back of the First Home Owners Grant this year, together with the impact of the various government stimulus packages and general infrastructure spending be enough to offset the prospect of significant labour shedding as a consequence of the ongoing significant deterioration in non-residential construction?