Australia Macro Service > Australia Research Briefings

Construction sector set to weather residential downturn

 

We estimate that residential building construction activity peaked in the second half of 2018. Given the latest approvals and commencements data, we expect activity to fall back by around 15% over the next two years. This would represent a significant drag on the economy were it not for a large pipeline of non-residential projects to be completed over the next few years.

 

In particular, we expect the resources that are currently working on attached dwelling construction (which is set for the biggest declines) to transfer into office construction, given the similarity in inputs and building approach.

 

There are some signs of capacity constraints in office construction, which suggests that capacity being freed up by lower levels of apartment building activity will be absorbed. This transition will limit the impact on the economy from the downturn in residential dwelling investment.

 

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