property wind down continues as apartment construction takes a hit

An otherwise “orderly retreat” from boom conditions in the apartment sector is being threatened by interest rate hikes and possible changes to tax policy settings, with construction activity experiencing a sharp decline in October.

A faster decline in house and apartment building and commercial construction reinforced overall falls in the sector – with apartment building falling at the sharpest rate in six years, according to the Performance of Construction index.

The monthly index, run by the Australian Industry Group and the Housing Industry Association, indicates that construction activity is “generally expanding” with a reading above 50, while a mark below 50 represents a decline.

Construction activity is a good temperature check on the wider health of the property market.

The overall construction index contracted 2.9 points to 46.4 in October, the sharpest decline since October 2016 and signalling a second consecutive month of decline after 19 months of growth.

Engineering construction, bolstered by a solid pipeline of public sector investment, was the construction industry’s strongest sector. House building contracted 1.6 points to 44.8, while apartment building fell at the sharpest rate since 2012 – falling 14.6 points to 26.6 points in October.

Related: Developers Need to Take Appropriate Measures to Prepare for Downturn: EY

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