Residential building activity hit an all-time high in 2018 but also started to slow in the same year, according to data released by the Australian Bureau of Statistics (ABS).
The residential building industry was able to record $68.7 billion worth of work on new homes over the year.
“The large amount of building work done is a product of having such a large number of homes under construction during the year. The figures also confirm that the volume of activity began to retreat from the peak during the second half of the year. The total value of building work done on new homes declined by 3.7% in the final quarter of the year,” said Geordan Murray, senior economist for the Housing Industry Association.
The figures also showed that some leading indicators of residential building activity, such as sales of new residential lots, new home sales, building approvals, and housing finance, all dropped significantly during the latter stages of 2018.
What does this mean? The pipeline of new residential building work is declining. In addition, as the homes that are under construction reach completion, fewer new projects will potentially replace them.
“The number of homes under construction will continue to decline throughout this phase of the cycle and the value of building work will decline accordingly,” said Murray.
The current figures provide an indication that next week’s GDP figures will reveal that the slowdown in new home building has detracted from GDP growth for the second consecutive quarter, according to the HIA.
The industry group also forecasts more declines in home building over the next two years, which could be a headwind for economic growth.
