While the national economy experienced the most significant decline since 2008, the Victorian economy and its construction industry retracted only slightly.

Population growth in Australia has slowed down in general since its recent peak in 2012, however Victoria still sees relatively robust population growth and remains attractive to movers. In the year to March 2016, Victoria’s population grew by close to 114,900 people, further consolidating its position as the fastest growing state. By comparison, the Victorian population grew by over 10,000 more than the NSW population in that period.

Full time employment declined slightly in Victoria, but this is off the back of exceptionally strong growth over the last year compared to the rest of the country, which is positive for housing.

Despite the seemingly robust GDP growth at the start of the year, consumer confidence portrays a mixed picture, suggested by the high fluctuation over the past year. For most of the last 12 months, confidence has remained below the 10 year average, and it is anticipated that the volatility is likely to continue in the short to medium term.

Housing affordability in Victoria has been improving since its worst point in December 2015, with residential properties being around 0.1 index point more affordable than the September quarter. This is linked to home loans being made more affordable in a record low interest rate environment.

Housing activity across Victoria remains strong, with a recorded year on year growth of 11.3 per cent from June 2015 to June 2016. It is forecast that completion of new detached houses will maintain at a relatively high level, as house commencements during the June quarter reached a record high level in recent years.

In comparison, units and apartments completion is likely to be leveled off. The total number of units and apartments approved declined significantly to record just 2,250 dwellings in September, down from 3,013 dwellings in August. The decline was due primarily to the drop in approvals of larger projects of more than four storeys.

The value of non-residential work in Victoria declined slightly in the June 2016 quarter, with the total work commenced being 9 per cent less than the total work done. While there is concern that less work in the pipeline may lead to even weaker September quarter, forward indicators suggest that it is likely to bounce by the December quarter as the total value of non-residential work approved increased by 63 per cent in September compared to June.

Engineering construction for the whole of Australia continued to fall in the June quarter of 2016, dropping by 9.9 per cent on a quarterly basis, and 25.9 per cent year-on-year and the short- to medium -term forecast outlook is subdued. However, total engineering construction work completed in Victoria continued to grow in the September quarter, up 9.9 per cent compared to a year earlier.

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