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Co-founder & CEO of AllenWargent property advisory & buyer's agents.
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Co-founder & CEO of AllenWargent property advisory & buyer's agents, offices in Brisbane (Riverside) & Sydney (Martin Place) - clients include hedge funds, resi funds, & private investors.
4 x finance/investment author - 'Get a Financial Grip: a simple plan for financial freedom’ (2012) rated Top 10 finance books by Money Magazine & Dymocks.
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Total construction work done declined by 0.7 per cent in seasonally adjusted terms to $46.4 billion over the first quarter of the calendar year to be 7.2 per cent lower over the year to March 2017.
After weaker trade and retail figures, all of the signs appear to be pointing to a weak result for GDP growth in the first quarter.
First, here's the good news: having peaked all the way back in 2012, engineering construction activity is now rising again.
There were still moderate ongoing declines in Western Australia and the Northern Territory as resources construction activity continues to wind down, but the rates of these declines is now tapering off.
And indeed, at the national level engineering construction activity is rising again, partly driven by infrastructure projects in the three most populous states.
Dodgy weather...or peak resi?
Residential building work done dropped by 4.7 per cent in the quarter, which was the worst quarterly result for the sector since the introduction of the Goods and Sales Tax (GST) more than a decade and a half ago.
Building activity slowed across new house building, apartments, and major renovations, suggesting that at least part of the reason for the decline was Cyclone Debbie towards the end of the quarter, while Sydney also had some shocking weather during the period.
And looking at the building work done figures by state confirms as much, with a very sharp 10 per cent quarterly drop in Queensland, and a somewhat lesser 4 per cent decline in New South Wales.
In Victoria building activity powered to a new record high in chain volume measures terms, with the industry going like the clappers in Melbourne and operating at close to full capacity.
New detached house construction has been broadly flat since the end of 2014, with the growth in residential construction since that time driven by record activity levels in the apartments sector.
Here too there was a sharp weather-related 22 per cent fall in Queensland, plus a relatively small decline in New South Wales.
But there was also a slowdown in evidence in Western Australia, South Australia, the Northern Territory, and Canberra.
On this evidence, then, it's possible that the peak for apartment construction activity might have passed, although there is of course still a huge pipeline of work to be completed.
Firstly, growth in the economy in the first quarter is going to be weak, and perhaps very weak.
On the positive side there is light at the end of the tunnel for the resources states, as engineering construction activity finally looks to be bottoming out, after years of contraction.
Strip out the impact of Cyclone Debbie and heavy rain in Sydney and the apparently sharp drop in residential construction in the first quarter of the year may prove to be less than dramatic.
However, it's hard to escape the conclusion that building activity in the residential sector is about to fade away as the record pipeline of apartments is delivered to the market.
It might reasonably be expected that dwelling starts fall by about a quarter over the next couple of years.
Given the huge level of employment in the construction industry, this could prove to be a very significant drag on the economy going forward.
Stamp duty and transfers paid in New South Wales hit $9.63 billion over the year to April 2017.
This will be another huge boost to the New South Wales Budget, which ended the 2016 financial year in surplus, partly thanks to a one-off bonus from the Ausgrid transaction.
Later this morning the Australian Bureau of Statistics (ABS) will releases its March quarter figures for Construction Work Done.
This may be a key data series in determining whether interest rates yet have further to fall.
Total construction activity has declined over the past three years as the resources boom has wound down, yet the industry still employees more than 1.1 million people, about three quarters of whom are accounted for by the residential property sector.
Construction work done fell by 7.8 per cent last year to $46.3 billion in the December quarter - although the rate of decline slowed significantly towards the end of the year - and this was despite another solid 5.7 per cent lift in residential construction in 2016.
There was a bit of dodgy weather around towards the end of the March quarter, so a further decline wouldn't be a surprise, although public works should now at least be contributing a little bit of growth.
Credit Suisse put out a note last week suggesting that Australia's output gap may be consistent with several further interest rate cuts, citing upwardly-biased labour market figures which understate the likely level of slack in the labour market.
The Bank for International Settlements (BIS) provides a neat data series measuring residential property prices across various advanced countries.
Comparing house prices in different jurisdictions is arguably of limited use, but it's nevertheless an interesting exercise to see how markets in different countries have performed over time.
Indexing to a base of 100 in the year 2010 and looking at a selection of countries shows how prices in Hong doubled before a recent correction.
New Zealand has also seen a thunderous 60 per cent increase in nominal prices, while Canada is not too far behind at 42 per cent.
The increase over the corresponding seven years in Australia was lower at 31 per cent, reflecting that while some markets have seen very strong growth - mainly Sydney - others have essentially been treading water.
Residential prices in Ireland have now recovered to where they were in 2010, but remain well below their pre-financial crisis peaks.
The BIS also provides indexed prices in real terms, adjusted for inflation.
Here, New Zealand looks like an outlier recording huge 47 per cent growth in real terms, comfortably outpacing Canada at 29 per cent, and Australia at less than 15 per cent.
Of the countries selected above, only Ireland has not seen prices increase in real terms since 2010, reflective of monetary policy stances globally.
Western Australia, which basically comprises the western third of the country, has been through a rough trot since the peak of the resources construction boom.
And then in April the seasonally adjusted unemployment rate suddenly fell from 6.5 per cent to 5.9 per cent.
Does this signal that the tentative beginning of a recovery? Well, perhaps.
Certainly the decline in engineering construction is now considerably closer to the end than the beginning, while the recent bounce in commodity prices might help to spur along some new drilling as iron ore reserve are depleted.
The trend unemployment rate has recovered more gradually from 6.5 per cent in October 2016 to 6.1 per cent in April.
This may in part have been helped along by net interstate migration to the eastern states.
In fact, the labour force figures for WA have improved on a number of metrics since the third quarter of last year.
For example, the employment to population ratio has tentatively begun to trend up again.
Victoria has overwhelmingly created most of the new jobs over the past year on a net basis, but WA has moved back into positive territory having really plumbed the depths last year.
Full-time employment had crashed as low as 890,800 in September 2016 - down from the record 2014 peak of 966,900 - but has since bounced back somewhat, up by 44,200 to 935,000.
Monthly hours worked have also increased year-on-year, up by 1.7 per cent in trend terms.
After such a punishing run, you wouldn't want to jinx it by calling the bottom, but there are at least a few signs of green shoots here for WA.
On an obliquely related note, from March next year residents of Perth will be able to fly non-stop to London on the Qantas Dreamliner service.
Domain reported a preliminary auction clearance rate of 76.9 per cent for Sydney on Saturday, recording 512 sales.
The median auction price was back up to its highest level in six weeks at $1,300,000, and was quite considerably higher than the corresponding weekend last year.
The median auction price reported for houses increased from $1,407,500 last year to $1,511,000, while the median price of units sold under the hammer increased modestly to $875,000 from $850,000 last year.
CoreLogic reported a clearance rate for the week of 80.7 per cent in Sydney from well over 1,000 auctions, which was its highest reported result for Sydney since April 9.
The top sale of the weekend was seen in Northbridge, where a grand 5-bedroom waterfront home on 1,891 square metres with panoramic Sydney harbour views and water access fetched $9.3 million.
A strong result, no doubt, but not a patch on the street record set in September last year.
Respective auction clearance rates were also very strong in Melbourne.
More lenders are set to report higher mortgage rates this week for interest-only loans.
Despite the unambiguously strong auction results, slowly but surely regulatory and Budget measures respectively are set to strangle city-wide growth in these two markets, as I looked at in a little more detail here and here.