ABS quarterly figures indicate start of residential construction upswing: Westpac

Private new residential building activity picked up by 0.9% in the third quarter of 2012, following a run of five quarters of declining activity.

Total residential building activity - including renovations - rose by a more modest 0.6% to $11.2 billion as renovation work done fell by 0.2%

Westpac says the September quarter figures mark a turning point with lower interest rates begin to have an impact.

“This is the start of an upswing, although the strength of the cycle remains uncertain,” says Westpac.

CommSec economist Savanth Sebastian says the outlook for the residential sector “looks much brighter”.

“Lower interest rates, strong population growth, healthy employment, and pent up housing demand is starting to see the housing sector shake of the shackles and begin a much needed resurgence, says Sebastian.

However, ANZ was less excited about the improvement in residential building activity, which it said was consistent with the improvement that it has witnessed in residential building approvals – a lead indicator for construction work done.

“Nonetheless, activity within this sector remains subdued and while we are expecting residential construction activity to strengthen further going forward, a number of structural impediments are likely to constrain the prospective upturn."

Private renovation work fell for the fourth consecutive quarter, an indication, says Westpac, "that consumers have been relatively cautious over this time”.

Construction work done in the non-residential construction sector declined by 4.5% quarter-on-quarter.

ANZ says ongoing weakness in non-residential building approvals data suggests that a “cyclical upswing in this sector remains some way off”.

Across all sectors, the volume of construction activity picked up by 1.7% over the September quarter to $51.3 billion to be 6.0% higher than a year ago and in line with market expectations with the mining investment boom once again the major source of growth in construction activity.

Westpac says the main downside surprise from its perspective was a “sharper than anticipated pull-back in public construction”.

The second quarter’s previously reported fall of 0.2% in construction work was revised up to a rise of 0.9%.