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GLOOMY OUTLOOK FOR PRE-CON MARKET

The COVID pandemic has hit the construction industry providing a gloomy outlook for pest control companies involved in pre-construction termite treatments.

The wide-reaching effects of the COVID-19 pandemic are having a significant impact on the construction market, with a 50% contraction expected in new building work. This will have a significant impact on the volume of pre-construction termite work.

“New home sales have fallen by 22.8% since the introduction of COVID-19 restrictions,” stated Housing Industry Association chief economist, Tim Reardon.

“In March, new home sales fell to their lowest level on record and they fell further in April. In parallel, the number of cancellations of projects now exceeds 30% – this is more than four times the typical rate of cancellations. During shocks such as the GFC or the 2018 credit squeeze, the cancellation rate peaked at 17%.”

Home under construction

However, the housing market was contracting even before the COVID pandemic.

“In a quarter that largely preceded the COVID-19 disruption, residential building activity chalked up the sixth consecutive quarterly contraction in the volume of building work done. The persistent credit squeeze throughout 2019 contributed to home building activity dropping back to levels last seen in 2014,” said Mr Reardon.

If Australia is to enter a prolonged recession, the construction market is likely to be depressed for some time. Even in the best case scenario with the lifting of COVID-19 restrictions and Government stimulus for the housing industry, the amount of pre-construction work is likely to be significantly down until well into 2021.

“Even the removal of all COVID-19 restrictions will not prevent a material deterioration in work and employment in the home building sector in the second half of 2020 and into 2021. Unlike the opening of other sectors, the lead time for the home building pipeline is six to nine months, so even if the economy restarts on 1 July the supply of work in residential building will continue to decline into 2021,” concluded Mr Reardon.