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Construction Revival Hopes for NSW

Tuesday, 11th May 2010

Construction Revival in NSW

Building approval data for New South Wales released by the Australian Bureau of Statistics last week has provided a glimmer of hope that activity levels in most construction sectors are emerging into a sustained growth outcome.

Dr Andrew Wilson, senior economist and national research and development manager for Davis Langdon said the seasonally adjusted value of building approvals in Australia rose 4.8 per cent in March compared to the previous month to be 23 per cent higher for the year compared to 2009 although remaining 11.5 per cent below the levels for 2008.

“For New South Wales, the value of building approvals for March rose 55 per cent compared to the previous month, with the March quarter 2010 total 4 per cent higher than for the same period in 2009,” he said.

“The value of non-residential construction also rose in March compared to February although was below the levels of the March quarter 2009.

“Despite the waning effect of the BER stimulus package, some signs emerged in March of a hint of a revival in the commercial and industrial construction markets of New South Wales, with significant leaps in activity compared to the previous month.”

Dr Wilson said a strong rise in residential construction for New South Wales in March contributed to the rise in overall approval values.

“The value of residential construction rose 21 per cent in March compared to the previous month and for the March quarter was 87 per cent above the value recorded for the same period in 2009’” he said.

“The value of residential construction approvals for the year ending March 2010 was 20 per cent higher compared to the previous year ending March 2009, indicating positive signs for sustained growth in this marketplace.

“Despite the winding back of the First Home Owners Scheme and the impact of interest rate rises, the number of new private sector homes approved in New South Wales has held up, although remaining well below the levels recorded for Victoria, Queensland and Western Australia.

“Apartment construction is indicating an emerging sustained revival with approval levels for the March quarter 2010 264 per cent higher than those of the March quarter 2009.

“Although a notoriously volatile series, the number of new apartments approved for the year ending March 2010 is 23.5 per cent higher than for the year ending March 2009.

“Given ongoing uncertainties with the global economic outlook, the associated fragility of equity markets and the continued intransigence and risk aversion by financiers, it is important that the cost base of construction remains competitive and emergent demand is nurtured.

“Interest rate policy must therefore be cognisant of the current delicate and hopeful nature of New South Wales construction industry.”

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