Residential Construction Activity Index

Drawing on our proprietary residential database, the Residential Construction Activity Index (RCAI) has been developed to provide in-depth insight into current and anticipated levels of residential construction activity across the country.

Based on construction activity relating to both the residential apartment and commercial residential sectors (including hotels, serviced accommodation and student accommodation), the RCAI provides more comprehensive and unique insight into the performance of the residential market than building approval-based measures as it distinguishes actual development activity and highlights the flow of activity over time.

By monitoring the status of individual projects throughout the construction cycle, the RCAI establishes the volume of aggregated building activity at a variety of geographies including national, state and suburb level.

Construction Activity Update 

As expressed in the following graphs, the RCAI highlights that residential construction activity along Australia’s eastern seaboard (NSW, QLD & VIC) will enter a period of significant decline over the coming 12 to 18 months. Even the best-case scenario whereby all projects currently marketed move to the construction phase will result in a net reduction in overall residential construction activity through the first half of 2020.

Metro Sydney

Having achieved its peak level of residential construction activity through FY18, very few apartment projects are anticipated to enter the construction phase across the Sydney market in FY20. This will further accelerate the recent decline in residential construction activity over the coming 12 to 18 months.

The extent of decline is highlighted by the fact that even if all currently marketed projects proceed to the construction phase, a 20% reduction in residential construction activity (down to 21,000 units) will occur in FY20 in comparison to FY19 when 26,500 units were ‘under construction’. If none of the currently marketed projects proceed to construction, this figure will fall to 11,000 units, a reduction of approximately 58% in Sydney’s residential construction activity.

Metro Sydney – Residential Construction Activity Index 

Graph One

Source: Charter Keck Cramer

Metro Brisbane 

Residential construction activity in Brisbane has recently stabilised following a two-year period of significant decline. Prior to this a sharp and unprecedented volume of supply was delivered to the market during the mid-2014 to mid-2017 period. With 8,800 units ‘under construction’ in FY19, a decline in activity will however occur through FY20. The extent of this decline will vary between 20% (7,000 units) and 60% (3,900 units) depending upon the number of marketed projects that enter the construction phase during this period..

Metro Brisbane- Residential Construction Activity Index**

Graph Two

Source: Charter Keck Cramer
**Includes Gold Coast

Metro Melbourne 

Of the east coast capitals, Melbourne is the only city that has the potential to achieve an increase in residential construction activity through FY20. With an estimated 24,000 units ’under construction’ in FY19, the best-case scenario for Melbourne in FY20 is that there will be an increase to 25,000 units in the ‘under construction’ phase.

Such an outcome would generate an upturn of 4% in residential construction activity. This assumes that all currently ‘marketed’ projects proceed to construction. In the event that none of the currently marketed projects proceed to construction, Melbourne’s fate will follow that expected for Sydney and Brisbane, with a decrease in residential construction activity of nearly 40% (to 15,000 units).

Metro Melbourne – Residential Construction Activity Index

Graph Three

Source – Charter Keck Cramer

Summary 

Given the significance of the construction sector to the Australia economy, the impending decline in residential construction activity will negatively impact the economy, particularly the building sector and those industries directly related to it. Furthermore, considering the extent of unprecedented dwelling demand which continues to be underpinned by high levels of population growth across Australia’s major cities, the RCAI highlights the likelihood of a supply-demand imbalance taking effect during 2020-21.

Comprising in excess of 23,000 projects across Australia, Charter’s National Apartment Database generates comprehensive and unique insights into the performance of the residential market and provides our clients with:

  • Simple and clear outputs
  • Indicators of actual & real activity
  • Data which is spatially referenced, and
  • Is optimised for complex analytics

For further information regarding how Charter can assist you and your residential project needs, please contact: Rob Burgess – National Director or Jonathan Mayes – Senior Analyst.