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SYDNEY: The housing affordability crisis continues to wreak havoc in the Australian construction industry, contributing to more deterioration in activity, figures show.
Activity in the construction industry deteriorated for a second consecutive month, with the Australian Industry Group-Housing Industry Association Performance of Construction Index (PCI) falling 0.4 points last month to 48.4.
The fall in activity meant the index remained below the key 50-point level that separates expansion from contraction.
Companies contributing to the PCI survey attributed subdued market conditions to low levels of customer inquiries and fewer invitations to tender, the Australian Industry Group (AiGroup) and Housing Industry Association (HIA) said.
AiGroup chief economist Tony Pensabene said the results once again highlighted the mixed and fragile state of the construction industry.
"While engineering construction is benefiting from an expanding investment pipeline, both the house building and apartment sectors remain in decline," Pensabene said.
"This is consistent with the recent weakness in approvals data, and clearly demonstrates that the residential sector is struggling to overcome the impact of higher interest rates and record low housing affordability."
The PCI showed residential builders have continued to report negative influences stemming from weakness in new home starts, low housing affordability and land supply shortages.
Simon Tennent, the HIA's executive director of housing and economics, said weaker results for the Australian PCI over the early months of the 2007-08 financial year highlighted the risk of a fourth consecutive year of decline in the building of new homes.
"The down cycle in the residential sector is lasting far longer than is normally the case because the housing affordability hurdle is simply too high for many to overcome," Tennent said.
"This situation is creating greater pressure in already very tight rental markets around Australia."
- AAP
