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Australia’s Housing-Sector Slump Shows Up in Another Sickly Set of Data

Australia’s Housing-Sector Slump Shows Up in Another Sickly Set of Data

(Bloomberg) -- Australia’s construction activity has slowed to the weakest in five-and-a-half years as tighter lending conditions and falling prices weigh on the nation’s housing market.

  • The Australian Industry Group Performance of Construction Index fell 1.9 points to 42.6 in December, the lowest since June 2013 as the sector shrank for a fourth straight month. A reading below 50 indicates contraction.

Key Insights

  • Apartment building was the weakest performing sector, falling for a ninth straight month and at the sharpest rate since mid-2012. Such projects were favored by investors in the five-year boom that peaked last year, but demand has fallen off amid tighter lending restrictions.
  • All four sectors of the gauge -- house building, apartments, commercial and engineering -- contracted in December, with declines in house and apartment activity the most marked in six years. That could weigh on fourth-quarter gross domestic product and jobs data, with construction accounting for about 10 percent of both indicators.
  • The Reserve Bank of Australia is closely watching construction activity, last month noting that the outstanding pipeline remained large and investment robust. Still, the rapid pace of Sydney house-price falls and worsening related indicators will likely prompt some commentary in its next interest-rate decision in February.

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  • The downturn in Sydney’s property market is set to deepen as tighter lending standards and the worst slump in values since the late 1980s cause nervous buyers to sit on the sidelines
  • Apartment approvals fell the most in a decade in November in another sign of investors pulling back
  • Why the RBA is getting worried

To contact the reporter on this story: Chris Bourke in Sydney at cbourke4@bloomberg.net

To contact the editor responsible for this story: Edward Johnson at ejohnson28@bloomberg.net

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