The national construction activity has expanded in February but at a slower pace than the previous month due to renewed weakness in house and apartment building, a survey has shown.
The Australian Industry Group/Housing Industry Association Performance of Construction Index (Australian PCI) registered 53.9 points, which was 4 points lower than in January.
The results of the survey show that while engineering and commercial construction maintained growth in February, the house building activity and level of apartment work fell.
House building fell for the first time in six months and could reflect an impact by higher interest rates.
Ai Group Associate Director, Economics and research, Tony Pensabene, said the further contraction in the house building and apartment sectors in the month was cause for concern.
“While the commercial and engineering sectors continue to benefit from a solid pipeline of work to be done, elsewhere conditions remain weak and new orders are continuing to contract,” Pensabene said.
“Higher interest rates are clearly having an impact, but there is also widespread reporting by house builders of the negative impact on activity of high land prices, excessive regulation costs, and land supply shortages.
The survey of 120 companies showed the activity in the apartment building sector had weakened, with the sub-index declining 24.1 points to 43.4, from January’s high of 67.5 points.
An Australian PCI reading above 50 points indicates construction activity is generally expanding: below 50 that it is declining.
HIA Executive Director, Housing and Economics, Simon Tennent said that a sustained recovery in housing is still a long way off.
“The land supply shortage will eventually turn around but for the immediate future, council delays and red tape are adding millions of dollars to the cost of putting housing on the ground which is in many cases making new housing projects financially unviable,” Tennant said.
