Construction work falls despite year-end HomeBuilder push

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on February 24, 2021
Construction work falls despite year-end HomeBuilder push

The latest data indicates the value of construction work done in the December 2020 quarter fell 0.9% to a touch over $51 billion.

A residential construction boost of 2.7% over the quarter was not enough to offset non-residential construction (down 2.4%), and engineering (down 2.8%) in seasonally adjusted terms.

The Australian Bureau of Statistics' (ABS) data also shows the value of residential construction was down 0.7% in the quarter compared to 2019.

Quarter four results were weaker than the 0.7% growth anticipated by Westpac economists and weaker than the market median of +1.0%. 

"The detail reveals that public works was the source of disappointment in Q4, down by 3.6%, following back-to-back gains," Westpac senior economist Andrew Hanlan said.

"Housing advanced, as expected, with the sector set for a strong rebound on the back of cheap credit and government incentives, pulling-forward demand.

"Going forward, the housing recovery and a lift in public works, with governments committing to new projects in the recent round of state budgets, will act to more than offset lingering weakness in private business construction work."

The gulf between approvals and completions appears to be widening, with the value of residential housing construction done being approximately $300 million more than in the September quarter, for a total value of more than $8.95 billion. 

Private sector housing approvals in the December quarter on the other hand amounted to nearly $36.5 billion, up from more than $28.8 billion in the September quarter. 

The increases were offset by falling unit construction work done, a slower public builds sector, and longer pipelines of construction work.

This coincides with a year-end rush in HomeBuilder applications as the grant was reduced from $25,000 to $15,000 at the start of 2021.

CoreLogic data released Monday also found housing construction costs rose 1% over the December quarter.

The Cordell Housing Index Price, also known as 'CHIP', indicates this builds on a 0.6% rise seen in the September quarter, and CoreLogic executive director of research Tim Lawless said there will likely be "additional pressure" on construction costs as demand continues to build.

“The lift in residential construction costs is likely to flow through to higher prices for built residential products and also place upwards pressure on inflation where housing costs receive the heaviest weighting within the CPI [consumer price index] ‘basket’ of goods'," he said.

“Although HomeBuilder is phasing out after March, it’s highly likely we will see a continuation in this trend towards higher residential construction costs.

"It will take some time for builders to work through the pipeline of house approvals that have surged through the second half of last year."


Building a home? The table below features construction home loans with some of the lowest interest rates on the market.

Lender

Variable
More details
GET A DISCOUNTED GREEN RATE
  • Interest Only during construction
  • No monthly, annual or ongoing fees
  • Get Australia’s lowest rate construction loan when you go green
GET A DISCOUNTED GREEN RATE

Green Construction Home Loan (Interest Only)

  • Interest Only during construction
  • No monthly, annual or ongoing fees
  • Get Australia’s lowest rate construction loan when you go green
Variable
More details
FREE REDRAW FACILITY
  • Pay more to reduce the amount of interest you pay
  • Easily access additional funds in your redraw
  • Great rates and low fees
FREE REDRAW FACILITY

Basic Investment Loan (Principal and Interest) (LVR < 60%)

  • Pay more to reduce the amount of interest you pay
  • Easily access additional funds in your redraw
  • Great rates and low fees
Variable
More details
BUNDLE YOUR HOME LOAN AND YOUR INVESTMENT LOAN FOR MORE SAVINGS
  • Pay more to reduce the amount of interest you pay
  • Easily access additional funds in your redraw
  • Great rates and low fees
BUNDLE YOUR HOME LOAN AND YOUR INVESTMENT LOAN FOR MORE SAVINGS

Yard Investor Bundle Loan (Bundled with Home Loan)

  • Pay more to reduce the amount of interest you pay
  • Easily access additional funds in your redraw
  • Great rates and low fees
Variable
More details
100% FULL OFFSET ACCOUNT
100% FULL OFFSET ACCOUNT

Offset Package Home Loan (Principal and Interest) (LVR < 60%)

    Variable
    More details
    100% FULL OFFSET ACCOUNT
    100% FULL OFFSET ACCOUNT

    Offset Package Home Loan (Principal and Interest) (LVR 60%-70%)

      Variable
      More details
      AN EASY ONLINE APPLICATION
      AN EASY ONLINE APPLICATION

      Yard Investment Loan (Principal and Interest) (LVR < 80%)

        Variable
        More details
        GREAT FLEXIBLE LOAN OPTIONS
        GREAT FLEXIBLE LOAN OPTIONS

        Basic Home Loan (Principal and Interest) (LVR 70%-80%)

          Variable
          More details

          Yard Investment Loan (Principal and Interest) (LVR > 80%)

            Base criteria of: a $400,000 loan amount, variable, fixed, principal and interest (P&I) home loans with an LVR (loan-to-value) ratio of at least 80%. However, the ‘Compare Home Loans’ table allows for calculations to be made on variables as selected and input by the user. All products will list the LVR with the product and rate which are clearly published on the Product Provider’s web site. Monthly repayments, once the base criteria are altered by the user, will be based on the selected products’ advertised rates and determined by the loan amount, repayment type, loan term and LVR as input by the user/you. *The Comparison rate is based on a $150,000 loan over 25 years. Warning: this comparison rate is true only for this example and may not include all fees and charges. Different terms, fees or other loan amounts might result in a different comparison rate. Rates correct as of May 29, 2022. View disclaimer.


            Photo by Troy Mortier on Unsplash

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            author-avatar
            Harrison is Savings.com.au's Assistant Editor. Prior to joining Savings in January 2020, he worked for some of Australia's largest comparison sites and media organisations. With a keen interest in the economy, housing policy, and personal finance, Harrison strives to deliver and edit news and guides that are engaging, thought-provoking, and simple to read.

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