Updated August 30, 2017 14:22:52

Photo: Construction work completed in the June quarter surges on the back of the engineering sector. (Graeme Powell: ABC)

The construction and engineering sector has rebounded strongly after a slow start to the year.

June quarter construction data released by the Australian Bureau of Statistics shows the value of building — both residential and non-residential — and engineering work completed rose by a better-than-expected 9.3 per cent to $51.6 billion.

Construction work, on a seasonally adjusted basis, is now 6.8 per cent higher than in the June quarter last year.

A rise was expected, given poor weather in the first quarter delayed work, particularly in residential construction, but the market forecast the growth over the quarter would be closer to 1 per cent.

However, much of the sudden rise was driven by a 21.5 per cent jump in engineering work completed and, in particular, the delivery of the Ichthys LNG platform off the north-west coast of Western Australia.

Building construction was relatively flat over the quarter and down 2.2 per cent for the year.

Residential construction continued to be a drag, down another 0.4 per cent on the soft first quarter to be 3.5 per cent lower than a year ago.

Construction activity has peaked: ANZ

While construction work done posted a strong headline number, the underlying results were weak, according to ANZ's Daniel Gradwell.

The apartment blocks soaring above capital cities look like heading into oversupply, and that means prices will fall.

"Aside from the strength in engineering construction due to an LNG platform import that will not flow through to Q2 [second quarter] GDP, housing construction declined further, and private non-residential building was also disappointing," Mr Gradwell said.

"The public sector fared much better, as expected, but the upshot of these results is that privately funded construction will not provide much, if any, support to Q2 GDP."

Mr Gradwell said the rebound in Queensland's weather-affected first quarter was expected, but the other data pointed to construction activity largely rolling over.

"This suggests that we have seen the peak level of housing construction, and are unlikely to see further growth from here," Mr Gradwell argued.

Building permits fall on slowing apartment construction

In a separate release, building applications fell again in July, further pointing to a slowdown in the construction sector.

While the figures are volatile, another slump in apartment dwelling approvals continued a recent trend.

Apartment approvals fell 6.7 per cent over the month, to be down almost 30 per cent over the year.

While the latest census figures bumped up Australia's population growth, it wasn't by enough to soak up the nation's housing boom.

With private sector housing approvals flat in July, overall approvals were down 1.7 per cent for the month and almost 14 per cent lower than a year ago.

JP Morgan's Henry St John said building approvals appear to have grown more sluggishly in 2017 when compared to the more upbeat numbers witnessed in previous years.

"This [the 14 per cent fall over the year] translates to 3,162 less dwelling projects approved per month, of which this decline has been exclusively concentrated into apartments, " he noted.

"The deteriorating trend in apartment approvals hardly comes as a surprise, given the speed with which approvals swelled in Melbourne, Brisbane and Sydney in 2014-to-16."

Building permits issued for apartments in all the key markets are now well down on a year ago, with Brisbane suffering the biggest reverse (-20.5 per cent), followed by Sydney (-15.9 per cent) and Melbourne (-7.9 per cent).

Mr St John said the fading apartment approvals imply residential investment will weaken significantly in coming quarters.

Topics: economic-trends, building-and-construction, australia

First posted August 30, 2017 12:40:50