Residential construction still on uncertain ground

PRELIMINARY ABS figures released today indicate that residential construction activity continued to improve in the final quarter of 2012, said the Housing Industry Association.

"Taken with other data published recently, these figures indicate that a tentative recovery may be underway in the residential construction market," said HIA senior economist Shane Garrett.

"It is encouraging that the actual volume of residential building work has increased for the second successive quarter following more than a year of declines," he said.

"The fact that the pace of increase picked up supports the view that some momentum may be gathering in the sector. It is also welcome that growth is strongest in the most populous states.

"Total residential building volumes in the final quarter of 2012 were up by 1.7 per cent on the previous quarter. This was driven by rather brisk growth of 2.2 per cent in new house volumes, the cornerstone of the sector.

"However, residential building activity was only marginally ahead compared with 12 months earlier.

"This was due largely to the continued absence of growth in the area of alterations and additions.

"International developments since the middle of 2012 have been largely benign but uncertainties continue to plague demand.

"Furthermore, key sectors of the domestic economy are struggling with the strong value of the dollar.

"Nonetheless, fundamental factors indicate that the current level of residential building activity is below the economy's long term demands.

"It is incumbent on policymakers to ensure that activity is guided back up to its appropriate level in a timely fashion."

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