Construction down 2%, but new home builds and renovations are up

author-avatar By on November 25, 2020
Construction down 2%, but new home builds and renovations are up

The latest data indicates just over $17.2bn of residential construction was done in the third quarter, down 1% on the previous quarter.

According to the Australian Bureau of Statistics (ABS), the value of construction work done overall was a touch over $51 billion, down 2% in seasonally-adjusted terms.

The only state or territory to record an uptick in construction over the quarter was the Northern Territory, up in value by 3.9%. 

New private sector houses built were up in value 1%, from $8.56 billion to $8.65 billion over the quarter in seasonally-adjusted terms.

Renovations and additions - including conversions - in the private sector were also up 4.56% in value over the quarter, from $2.25 billion to $2.35 billion.

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

Westpac senior economist Andrew Hanlan said this was weaker than market expectations.

"The point estimate of -2.6% was weaker than the market (median -2%), albeit not as soft as Westpac (-3.8%)," he said.

"The key surprise, housing declined by less than anticipated ... renovations, often volatile, rebounded."

However, Mr Hanlan said the "key take-out" out of construction data was that "the Australian economy rebounded solidly as COVID restrictions were eased."

"The construction data is one of the quarterly partials ahead of Q3 GDP [gross domestic product], to be released on December 2," he said.

Second quarter GDP figures confirmed Australia was in a recession, down 7% - the highest quarterly fall on record (data goes back to 1959).

Two consecutive quarters of GDP growth, on the other hand, implies Australia is out of a 'technical' recession.

How does HomeBuilder factor in?

Housing Industry Association economist Angela Lillicrap said construction work done was at its lowest level since 2014, but did point to a couple of green shoots in the sector.

“This data precedes the positive impact of the HomeBuilder program due to the lag between purchasing a house and commencing construction. It does reflect the impact of the restrictions on activity including the Victorian shutdown period,” she said.

“With the outlook for a strong new home building market and a strong renovations market, employment within the sector will grow into the new year."

A boost in private renovations and home builds have not necessarily led to keeping tradies in jobs, with insolvencies in the past fortnight up in the construction sector by 6.25%, according to the Australian Financial Security Authority.


Photo by Henry & Co. on Unsplash

Disclaimers

The entire market was not considered in selecting the above products. Rather, a cut-down portion of the market has been considered which includes retail products from at least the big four banks, the top 10 customer-owned institutions and Australia’s larger non-banks:

  • The big four banks are: ANZ, CBA, NAB and Westpac
  • The top 10 customer-owned Institutions are the ten largest mutual banks, credit unions and building societies in Australia, ranked by assets under management in November 2020. They are (in descending order): Credit Union Australia, Newcastle Permanent, Heritage Bank, Peoples’ Choice Credit Union, Teachers Mutual Bank, Greater Bank, IMB Bank, Beyond Bank, Bank Australia and P&N Bank.
  • The larger non-bank lenders are those who (in 2020) has more than $9 billion in Australian funded loans and advances. These groups are: Resimac, Pepper, Liberty and Firstmac.
  • If you click on a product link and you are referred to a Product or Service Provider’s web page, it is highly likely that a commercial relationship exists between that Product or Service Provider and Savings.com.au

Some providers' products may not be available in all states. To be considered, the product and rate must be clearly published on the product provider's web site.

In the interests of full disclosure, Savings.com.au, Performance Drive and Loans.com.au are part of the Firstmac Group. To read about how Savings.com.au manages potential conflicts of interest, along with how we get paid, please click through onto the web site links.

*Comparison rate is based on a loan of $150,000 over a term of 25 years. Please note the comparison rate only applies to the examples given. Different loan amounts and terms will result in different comparison rates. Costs such as redraw fees and costs savings, such as fee waivers, are not included in the comparison rate but may influence the cost of the loan.

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Harrison joined Savings in 2020. He is an experienced journalist, with previous stints at News Corp and financial comparison site Canstar. With a keen interest in personal finance, Harrison is passionate about helping consumers make more informed financial decisions.

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