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Poor outlook for construction in SA

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Trends in housing finance commitments – an indicator of future construction activity – suggest South Australia’s recent recovery in residential building may stall.

Analysis by the SA Centre for Economic Studies (SACES) shows SA is facing a period of weakening activity in the key sector.

“Trend estimates indicate that SA recently recorded its sixth successive monthly decline in the number of housing finance commitments,” the analysis said.

“The number of commitments fell by 0.6 per cent in the latest month – the poorest result of any state or territory.”

SACES executive director Michael O’Neil said the data shows a pattern that reverses recent positive trends in construction approvals for new dwellings.

“The recent pattern of declining financial commitments for SA is at odds with building approvals data which suggests a steady rise in the number of dwelling units approved over recent months,” he said.

“Housing finance commitments are a more forward indicator of building activity than approvals data, suggesting that the latter may weaken over coming months.”

O’Neil said the national trend showed strong interest from investors, at the expense of housing affordability.

“At the national level and interesting emerging trend has been much faster growth in housing investment for investment purposes rather than owner occupation over the past year.

“National financing for residential investment in February 2014 was up 32 per cent compared to the corresponding month a year ago whereas investment for owner occupation was up 19 per cent.

“The renewed investment activity has provided a boost to house prices, but raises concerns about housing affordability, particularly where investment is driven by international investors.”

 

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