Builders' expect activity over the next six months to be less robust then presently.
The Master Builders Association December quarter survey results lend weight to the call of builders’ for the Reserve Bank not to raise interest rates further.
The latest survey results are consistent with recent ABS and other anecdotal data that show the housing sector slowing.
The November rate rise has had an immediate impact on the housing market with builders reporting that home buyers are now taking a more cautionary approach.
The survey results for the December quarter indicate that industry conditions continued to improve in the past three months with the index improving to 75.9 compared with 68.3 in the previous period. 92.3% of respondents rated their own business conditions as satisfactory or better.
Seven of the eight States and Territories recorded strong business conditions, headed by Queensland and New South Wales, with indexes of 92.0 and 91.2 respectively. The weakest conditions were recorded in the Northern Territory where the index was 45.5.
In contrast, expectations for the next six months weakened considerably with an index of 61.0 recorded in the December quarter compared with 70.4 in the September quarter. The timing of the survey around late October/early November may explain this reversal of sentiment, with heightened expectations around this time of the subsequent rise in interest rates.
Businesses were increasingly concerned about available capacity with the index of capacity falling further to 46.2 in comparison to 47.6 three months ago. The adequacy of capacity has fallen considerably since the June quarter 2001 when the index was 74.6. This indicates that there was significant excess capacity at that time.
Results from the survey also indicated that industrial relations were a major problem in Western Australia, New South Wales and Victoria.
Whilst the overwhelming majority of respondents (69.5%) were not expecting to change the number of apprentices they employ, encouragingly, 24.2% said they were likely to put on more apprentices compared with only 6.4% of business who said they were likely to release apprentices.
Significant regional shortages of labour resources were also revealed in New South Wales, Queensland and the Australian Capital Territory. In Queensland all surveyed categories were in short supply with extreme difficulties indicated in finding bricklayers, plaster fixers, painters and steel fixers. In New South Wales the most difficult to find were bricklayers, project managers, plaster fixers, concreters and steel fixers. In the ACT difficulties were apparent in finding foremen, site managers and bricklayers.
Expectations for the national economy for the year ahead deteriorated somewhat in the December quarter but the outcome still reflects a degree of optimism about the national economy given the current strength in activity. 79.7% of respondents expect GDP growth to be about the same or higher in the next twelve months and only 20.3% expect lower growth.
Supplementary questions on home warranty insurance indicate a significant degree of difficulty obtaining insurance with only 2.2% of respondents indicating that obtaining insurance was less difficult. A very high overall index of 90.3 was recorded on the cost of this insurance with 81.4% of respondents indicating that the cost of insurance had risen.
*Wilhelm Harnisch, is the Chief Executive Officer of the Master Builders Association of Australia
