Inner-city apartment markets have a vulnerability: Master Builders

The latest Master Builders Survey of Building and Construction shows industry sentiment holding up, despite a recent deterioration in some of the leading indicators. 

Matthew Pollock, housing national manager said there had been a bounce in sales contracts and a loosening of skills shortage constraints. 

“By sector, house builders for detached housing were the most positive, particularly in New South Wales, Victoria and Queensland where strong population growth continues to support a healthy pipeline of work-on-the-books," he said.

"These results show that while activity in inner-city apartment markets may drop off over the next two years, broader industry sentiment remains positive,” he said in reference to the September quarter issue of Master Builders quarterly National Survey of Building and Construction. 

“Sentiment here is supported by ABS statistics which show residential construction work holding up - up by 1.2 per cent in the June quarter 2016 to be 6.6 per cent up on over the year"

“But areas of vulnerability remain,” he said.

“Non-residential builders have lowered profit expectations and non-residential work-on-the-books is soft. Typically, these are good leading indicators for industry prospects, with the current results pointing to a slower period for the nation’s non-residential builders,” Matthew Pollock said.

“The CBD office markets in Perth and Brisbane remain a lingering weight on broader sectoral business conditions as the resource boom hangover continues to cast a long shadow. Other pockets of vulnerability include inner-city apartment markets, and pretty much the entire engineering construction sector,” he said.

“In terms of employment, the survey shows labour availability has loosened across the board, with all construction related occupations covered in the survey showing index values of below 50,” he said.

The loosening of labour market conditions is good news as long as building activity holds steady, but less positive prospects going forward may pose a risk to employment.

"Jobs may be at risk if building activity was to deteriorate beyond current market expectations,” Matthew Pollock said.