The Housing Industry Association (HIA) attributes a March decline in construction activity in Australia to a drop in new orders and decreasing demand for residential buildings. Both HIA and the Australian Industry Group reported the decline.
The drop was the first in the past three months as the Performance of Construction Index (PCI) dropped below 50 for the first time this year. The index compiled by the Australian Industry Group and HIA was reported a 48.7 in March, falling by 4.1 points compared to the previous month. PCI also reported the apartment sub-sector fell for the second straight month in March.
The back slide occurs at a time of rapid population expansion and double-digit annual house price growth in many of Australia’s largest cities. Current stumbling blocks to increasing the housing supply include higher interest rates, constraints on obtaining financing, and state planning laws.
"Developers are having great difficulty in securing bank finance for their projects," says Aaron Gadiel, chief executive of the property development group Urban Task Force Australia. "Any increase in interest rates undermines demand for housing and boosts the holding costs faced by developers."