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Building activity strains timber supply

The strong rise in residential building activity driven by the ‘GST pull effect’ and its boost on demand for timber products continued in the March quarter according to data released by the Australian Bureau of Agricultural and Resource Economics.

The consumption of sawnwood in the March quarter of 1.6 million was 9 per cent higher than for the same time last year.

According to ABARE, this goes against normal seasonal trends when sawnwood consumption falls in the March quarter.

The high level of housing activity and demand for building materials is straining the supply

of timber products, pushing up some timber product prices by as much as 10 per cent.

The price index for timber and joinery used in housing rose 5 per cent in the March quarter 2000 and is 8 per cent higher than in the 1999 March quarter.

“There is also a growing gap between dwelling approval and commencements, with the leading indicators for dwelling commencements suggesting that the industry is nearing its capacity constraint,” ABARE said in its report on demand for timber products.

“Investment in housing as a share of gross domestic product now exceeds the peaks recorded in the late 1980s and early 1990s.”

The seasonally adjusted estimate for private sector house approvals fell almost 16 per cent in April, the highest monthly fall on record.

Also, housing finance estimates for construction of new dwellings fell nearly 15 per cent in April to 4,919, their lowest level since 1996.

“However, the downturn in activity is not expected to occur until later this year, as builders complete a backlog of orders,” the report said.

The effect of rising interest rates and the GST is forecast to result in a 20 per cent fall in new housing commencements in 2000-01.

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