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Residential construction remains healthy

By Louise Morrin

All eyes have been on the construction sector over recent months, especially as the Australian economy looks for new ways to plug the gap left behind by resources industries. Results of the latest Australian Industry Group/Housing Industry Association (HIA) Australian Performance of Construction Index have proved interesting reading, as they show some of the differences across the sector.

Throughout May, the index continued to decline, but residential construction still remained a standout performer. The Australian Industry Group's head of policy Peter Burn described residential building as being at "relatively healthy levels", despite the index's overall reading for the month only standing at 47.8. A reading of 50 is considered the point between contraction and expansion.

All four of the construction sub-sectors experienced contraction in May. Although house building was down for the first time in three months, it nevertheless performed better than many other parts of the industry, potentially leading to more real estate in Carlton.

"Current residential construction is very strong, with detached house building above average levels and the medium/high density sector setting fresh records," noted chief economist of the HIA Harley Dale.

"The May PCI updates for the residential sector are disappointing, but there is little in the way of discernible trend in the activity and new orders sub-indices."

Earlier this month, the Australian Bureau of Statistics (ABS) released its latest building approvals data. This revealed that dwelling approvals were down 0.4 per cent in trend terms throughout April, although New South Wales bucked the trend. The state's approvals were up 0.1 per cent, suggesting that additional property in Carlton could be on the horizon.

The ABS also reported a rise in private sector housing approvals over the course of the month. New South Wales once again experienced strong growth, as approvals were up 2.8 per cent from March levels.

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