Underlying confidence in Australian property market growing: survey
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E-mail Xinhua, October 21, 2013
Underlying confidence in the Australian property market is growing despite a national survey released Monday failed to identify clear evidence of a recovery.
According to the Master Builders' (MBA) National Survey of Building and Construction, increased building activity will not be triggered in the short term despite improvement in some key indicators, with investor confidence shoring up fundamentals in Aussie property.
Peter Jones, Master Builders Chief Economist, said that while buyers were happy, builders remained anxious.
"Overall, builders are cautiously confident that an embryonic recovery is underway, but there is no such confidence about expectations for their own business."
A PricewaterhouseCoopers report released last Friday on Australia's productivity challenges singled out the construction industry as being in dire need of improvement.
Construction is responsible for 6.9 percent of Australia's GDP, and employs 1.043 million people, nearly 10 percent of all employees.
But according to the report, "The Australian construction industry is a laggard saved from additional scrutiny only by the productivity malaise that has beset other Australian industries".
The report looked broadly at Australia's total productivity as well as that in the construction sector, and highlighted that Australia's overall productivity growth is still low.
However, a detailed market analysis from Research and Markets said the Australian construction industry registered growth of 3. 86 percent during the review period (2008-2012).
Growth in other markets was subdued due to the impact of the 2009 financial crisis.
The industry is anticipated to expand at 5.31 percent over the forecast period (2013-2017), driven by growth in the infrastructure market in line with government measures to enhance transport infrastructure.
Industry expansion will also be driven by an increase in the population, government initiatives to support the growth of high value add industries, and an expected revival in investor confidence among businesses and individuals.
However MBA chief economist Jones said the state of the construction industry was bleak.
"The survey paints a concerning picture of business conditions in building and construction despite recent modest upticks in building approvals and housing finance," he said.
"The fragility of the recovery is reflected in the difficult and very patchy industry conditions highlighted by the survey," he said.
"Residential builders are hopeful business conditions will improve somewhat over the next six months, but this confidence is tempered by the dire day to day conditions experienced by the industry," Peter Jones said.
"The outlook for commercial building is even less rosy."
"A pick-up in activity is not on the cards in the immediate future," Peter Jones said.
"Until low interest rates show signs of gaining more traction, the Reserve Bank should keep open the possibility of a further rate cut in the near future."
In 2012, the construction industry contributed 9.8 percent to the Australian economy's gross value add, increasing from 92.1 billion Australian dollars in 2011 to 99.5 billion in 2012.
The industry's contribution was the fourth-largest after mining (13.1 percent), professional, scientific and technical services ( 10.2 percent), and manufacturing (10.1 percent).
Yet, investors remain bullish over Australian property. The RP Data-Rismark 5-city daily dwelling price index, which covers the five major Australian capital city markets, recorded a 0.39 percent rise.
According to Richard Grainger, a director with the Australian property platform Sunrise Property Group (SPG), the rise was the eighth consecutive increase in values.
"Over the past 12 months, values have risen by 7.07 percent with all major markets experiencing increases." Grainger said.
"The fundamentals here remain strong, and the underlying optimism is one borne of experience -- consistent returns don't lie." Endi
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