The end of 2014 was a slow period for new construction, but 2015 is looking good for builders and home buyers. The latest Australian Industry Group and Housing Industry Association Performance of Construction Index (PCI) showed a subdued performance across the sector at the end of last year.
"Recovery in the construction industry was looking very promising through the middle of 2014, particularly in the housing and apartment sectors. In the final months of 2014 however, this much anticipated recovery seems to have lost its momentum," said Ai Group Chief Economist, Julie Toth
"We saw a noticeable deterioration across most of the key activity indicators for house building and apartment construction in November and December."
Ms Toth went on to say that commercial construction and other parts of the industry failed to inspire confidence in the last throes of 2014.
The unfortunate result of this was a drop in construction employment, according to HIA Economist Diwa Hopkins. She also noted that prior to the November and December slowdown, residential construction had been the star performer in the building industry.
Looking forward to 2015's property and real estate market
Fortunately, it's not all doom and gloom on the construction front, indicating some respite may be in store for those involved in the construction and real estate industries.
According to an 8 January release by the HIA, record dwelling approvals could signal an increased period of activity in new home building. HIA Senior Economist Shane Garret was positive about the impact on the construction industry going forward.
"Residential construction was the economy's good news story during 2014, and today's figures indicate that we can look forward to another positive year for the industry," said Mr Garrett.
"The fact that approvals hit an all-time high during November augurs very well for the pipeline of residential construction work in 2015."
The number of approvals for new dwellings was at 18,245 - far outstripping previous years. All five previous record months were between 17,556 and 17,755. The last record month before November was January 2014, preceding the glut of construction activity in the middle of the year - a good sign for things to come.
Home loans for construction increase
The HIA noted on 12 January that increases in construction home loans could signal an increased period of activity in new home building.
Analysis of Australian Bureau of Statistics data by the HIA revealed a 7.6 per cent annual growth in the number of home loans for dwelling construction in November 2014. Combined with the record number of dwelling approvals, the future is looking bright for construction, finance and real estate in Australia.
"Last week saw building approvals reach an all-time high during November, and today's lending figures add further to the evidence that Australia's new home building industry will start 2015 on a strong footing," said Mr Garrett.
The hotspots for home loans for construction and new home purchases seem to be in the Northern Territory (an increase of 63.9 per cent) and Tasmania (14.3 per cent), according to the HIA.
Victoria (3.3 per cent), Queensland (1.6 per cent) and South Australia (1.7 per cent) all experienced increases as well. New loan volumes in NSW, Western Australia and the ACT fell over the past year.
The hotbed of activity in the NT and Tasmania could prove to be very lucrative for those local economies, as well as construction in general as builders around the country are gearing up for a very productive start to 2015.
With the recovery in the residential construction sector forming a major part of the country's economic performance over the last year, even those states and territories where construction is not strong can expect positive flow-on effects from the anticipated increase in activity.
