“In terms of the 4Q GDP accounting, today’s results were on the softer side of expectations, though not as much as the headline suggests given the engineering skew, which has less translation to the flow of economic activity and payments,” Mr Jarman said. “We were tracking 0.7 per cent quarter on quarter on GDP before today’s data, and now have 0.6 per cent.
Total home-building fell 3.6 per cent in the fourth quarter to $18.9 billion in seasonally adjusted terms from $19.6 billion in September, while infrastructure-driven engineering work shed 5 per cent to $21.5 billion. Non-residential work gained 1.9 per cent to $10.7 billion, making up ground after a 2.3 per cent decline in the third quarter.
Construction is at a tipping point, with the housing boom that has led to record levels of new dwelling creation poised to slow and a ramp-up in infrastructure spend starting to make its way through the economy.
Wednesday’s figures, however, raised the risk that construction’s switch from one sector to another may not be as smooth as many observers – including the Reserve Bank of Australia – are hoping.
New apartment completions are likely to fall by one-third this year. NIC_WALKER
“We expect the residential construction downturn will be much deeper than the RBA’s outlook and our forecasts are for a decline of around 18 per cent peak-to-trough in dwelling investment,” Ms Owyong said.
“Today’s figures support this less optimistic view for building activity.”
Developers said the decline in residential construction, a product of tighter credit policies triggered by banking regulator APRA, came despite a the country having strong economy and population growth.
“We are seeing a slowing across the board in our sales offices – especially where people are looking to buy with borrowed money,” said Don O’Rorke, whose company Consolidated Properties develops high rise apartment towers in Queensland. =
“There is uncertainty due to the outcomes of the royal commission and the May federal election. It is therefore not surprising to see building approvals so low and development and construction slow down.”
Third-quarter economic growth slowed to 0.3 per cent, the weakest pace in two years, and 2.8 per cent from a year earlier, December figures showed.
Developer Lendlease on Monday said its Australian construction revenue for the six months to December fell to $3.7 billion from $3.4 billion and development revenue for the group dropped to $870 million from $2 billion.
In response to a slowing Australian housing market, the company is increasing its focus overseas.
Lendlease, last year for the first time said its European apartment pipeline overtook its Australian pipeline, and on Monday said its growing portfolio of urban development projects in Europe and the Americas offered the best opportunity in the medium-term.
Contract wins during the period included Victoria Cross in Sydney and Lakeshore East, Chicago, boosting its total Development pipeline 31 per cent to $74.5 billion.
With many apartment projects started during the boom still underway – many are due to reach completion this year, the big fall in Australian housing construction has yet to become apparent. But it will, Mr Bloxham said.
“For the moment, there remains a large pipeline of dwellings under construction, which is set to support housing construction activity in the first half of 2019,” he said. “However, the decline in new building approvals suggests that housing construction should start to be a drag on growth, particularly in NSW and Victoria, in the second half of 2019 and in 2020.”
Earlier this month, JLL’s Q4 2018 Residential Apartment Markets report said new apartment completions nationally will drop by almost one-third this year to 16,000 from 23,200 last calendar year, as a consequence of the regulator-driven curbs on mortgage lending and conditions will remain tight in the short-term.
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