The Business Day Markets Blog has posted analysis from RBS arguing that dwelling construction is about to pick-up sharply:
We have been constructive on this sector and its increasing contribution to activity in the year ahead for some time.
The most recent partials – lending, approvals – point to increasing momentum.
While there are numerous supportive factors, an often under appreciated one is the continued above-trend pace of population growth. Recently released Q3 data confirmed population growth continuing at a decent 1.8% y/y pace driven by migration.
This is among the highest in the OECD and well above the OECD average, which has been stagnant around 0.7% for much of the last decade and a half.
Obviously, I agree with RBS’ analysis. As shown in the next chart, population growth has been running strong since the mid-2000s, whereas dwelling approvals have recently picked-up sharply:
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Given the inherent lag between approvals and actual construction activity, 2014 and 2015 are shaping up as very good years for national dwelling construction.
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Any pick-up will also be welcome in light of the slump in the rate of dwelling construction since the mid-1990s:
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