Australian construction hits record $29.9b in June quarter but experts warn it won't last

Australia’s construction boom has some way to go before it cools, with new figures showing building work valued at a record $29.9 billion.

The June-quarter figure is an increase of 2.5 per cent over the March-quarter figure and an even bigger increase over the year to date at 6.5 per cent.

The results have surprised many, after several forecasts of softer increases after a weak result in the previous quarter.

The rise was driven by residential construction, which increased by 3.1 per cent in the June quarter. Detatched-homes building work was worth $9.1 billion and units accounted for $8.1 billion.

“It’s a very strong result for the quarter – a lot of forecasters were anticipating construction would fall away quite quickly at the peak in 2016,” Geordan  Murray, senior economist at the Housing Industry Association, said.

“But we’re seeing the level of activity maintained, and it’s proving to be a resilient cycle for residential building,” Mr Murray said.

Total residential construction work was valued at $19.3 billion, but Mr Murray said this was a preliminary figure that underestimated the true value of contribution to GDP.

Total construction work – which includes residential, non-residential and engineering – in Victoria and NSW were the main drivers of that growth.

Mr Murray said home renovations were weaker than other residential construction, down 3.1 per cent in the past quarter to $2.1 billion and 4.6 per cent in the year to date.

“That’s probably indicative of the fact that we’re continuing to see the slow growth of household income,” he said.

“There’s a lot of residential development happening in the last few years and that involved people purchasing off the plan and that’s due to the delays of when an estate releases free sales through to when construction begins.”

The value of construction work will remain high for the next 12 months, according to Mr Murray, because it is expected construction activity will continue to filter through from sales from 18 months to two years ago.

The strong results  follow a strong rebound in building approvals in June.

Shane Oliver, AMP Capital chief economist, said the surprisingly strong results won’t last.

“It’s certainly a lot more than I was expecting but that’s probably not going to be sustained because approvals might start to fall down again and you’re seeing a reduction in the crane count,” Dr Oliver said.

While he didn’t expect the rate of growth to last, Dr Oliver said it would help buoy the economy for now. “The bottom line is it will help the economy [keep] going … there was a lot of concern the economy will deteriorate.”