Housing construction posts ‘significant fall’

Construction activity was weaker than expected in the first quarter of the year, hindered by a decline in residential building.

According to the latest Quick Reaction by ANZ, the level of construction work done saw a "moderate decline" in the quarter one of 2017.

ANZ explained that the fall was driven by a "sharp decline" of 4.7 per cent quarter-on-quarter in residential building.

"While we have been saying that we are around the peak in housing construction and further growth is unlikely, the size of this fall is quite surprising. There is still a significant backlog of work remaining, with the pipeline increasing to a record $37 billion as of Q4 of 2016," the bank said.

The analysis showed that the sharpest falls occurred in NSW (-4.9 per cent q/q) and Queensland, which dropped by a "massive" 13.6 per cent q/q.

"Some payback in NSW is understandable given it rose nearly 6 per cent q/q to a record peak the previous quarter. But the scale of the overall decline, despite the volume of work remaining, makes us question whether some of the fall was weather-related. Cyclone Debbie clearly affected the tail end of March, while the eastern seaboard also experienced high rainfall earlier in the month," ANZ said.

Meanwhile, other segments saw positive results, such as the public sector, with broad-based growth across engineering construction and non-residential building.

"A solid pipeline of work, especially in roads and telecommunications, is likely to ensure that publicly-funded construction remains elevated," the bank said.

"Nonetheless, the significant fall in housing construction will be a drag on Q1 GDP," it concluded.

[Related: Construction falls for second quarter in a row]

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Francesca Krakue

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