Building confidence ‘dead’

PROPERTY News

Despite all of the talk about a recovery and the re-emergence of the mining boom, confidence in the building industry remained subdued during the September quarter, according to a report released by Master Builders.

Master Builders director of housing policy Paul Bidwell said the latest Survey of Industry Conditions report highlights that rising interest rates, tight finance conditions and ongoing global economic uncertainty continue to take toll on the building and construction industry.
“Despite anecdotal evidence suggesting the financing situation is improving, businesses continued to report difficulties in securing finance,” he said.
“Tighter lending criteria and higher financing rates are also creating headaches for potential buyers, particularly those at the lower end of the income scale. And the risk-averse attitude of many consumers is contributing to a more difficult trading environment.
“So, it’s no surprise that nearly 60 per cent of businesses in the residential sector reported weaker trading conditions during the quarter.”
Local government planning approvals and infrastructure charges were other major constraints currently facing builders. The situation in the commercial sector was not much better with 50 per cent of businesses reporting weaker conditions over the three months to September.
“The availability of finance remains a critical constraint, although there are signs that this is improving very slowly,” Mr Bidwell said.
“Private sector demand also remains soft and there is growing concern about the sustainability of current activity levels once the remaining stimulus spending winds down.
“Most respondents are not confident about the short-term outlook either, with the majority expecting conditions to stabilise at the current less than satisfactory levels, rather than improve.
“The silver lining in this gloomy outlook is the fact that most businesses do not currently believe conditions will deteriorate further, unlike the last quarter’s results.”
The Reserve Bank of Australia’s (RBA) decision to leave rates on hold during the quarter helped to calm industry nerves; however, this may change next week if the RBA decides to lift the official cash rate.
“Another rate rise will kill off any hope of short-term recovery,” he said “Businesses have seen how six interest rate rises from October 2009 through to May 2010 dampened demand, so they will be acutely aware of the potential impact of any further rate rises on consumer confidence and housing activity.”
Further jobs were lost during the quarter with more than a third of businesses reporting that they had reduced the size of their workforce. The building and construction sector is a major contributor to Queensland’s economy, employing about 10 per cent of the state’s workforce. Yet, since August 2008 the industry has shed almost 24,000 full-time workers. “Given that businesses usually shed staff as a last resort, these figures highlight the substantial pressure that many businesses in the industry are under,” said Mr Bidwell.
“While this attrition rate is expected to improve slightly during the December quarter, it will still remain high with one in four businesses forecasting a reduction in employee numbers.”
Master Builders Survey of Industry Conditions report provides information and analysis on industry expectations and business performance, based on a survey of Master Builders members across Queensland. For copies of the state and regional reports, visit www.masterbuilders.asn.au and click on ‘Publications’ and ‘Housing industry reports’.

• Master Builders is the peak industry association representing building and construction in Queensland since 1882. With more than 10,000 members, Master Builders is the voice of the industry. Their services support members to operate professional and profitable businesses that deliver superior quality outcomes to their customers.