Biggest Residential Building Slump in a Decade
In the third quarter of 2010, the building of residence went down by 6.1 percent to a decade- low, while construction also went down by 2.1 percent to $41.4 billion. The reduction in property construction and weaker demand for properties is due to the reduction of the government stimulus and property price growth.
However, there may be light at the end of the tunnel as the overall costs of construction for the third quarter of the year went up by a two-year high of 0.7 percent. Building activity in the private sector is expected to improve due to the rising economy while businesses will revert to the forecast before the global economic meltdown took place.
Yet, companies are still waiting until strong economic recovery takes place. Though the construction of residential properties is still weak, they have been planning aggressively for future projects. These construction projects are worth $42.4 billion which is 5.9 percent lower than the total during the first quarter of the year.
Though property construction has slowed down, the Reserve Bank of Australia is not worried for more projects are expected in the foreseeable future. However, the recent official cash rate increase by the RBA can bring a negative effect on construction and it would be better for the RBA to keep the official cash rate at 4.75 percent.
In an overall perspective, there should be a bright future for property construction as long as construction costs do not increase too much. Construction activity will pick up eventually due to the surging mining industry and steady population growth.
