Investors keep construction industry ticking over

It has been well documented that the mining boom has passed its zenith and that resource-related construction is phasing out. This has left many who flocked to the mining industry in search of other industries in which to ply their trade.

Fortunately there is another industry to watch - residential construction. An increase in residential construction came about as international demand for Australia's minerals waned. Ironically, the decrease in demand for minerals came largely from a slow-down in the Chinese real estate market, which used vast amounts of steel and related materials in new construction.

Investment upon investment

Australia's own residential property market has been quick on the uptake, experiencing a good country-wide growth in real estate values, with the two hotspots being Melbourne and Sydney. This increase in Australian real estate values has been influenced by investors, including Chinese and other Asian investors, but more importantly, the growth has fuelled further investment. Coupled with low interest rates and favourable investment conditions, Australia's residential market has taken off.

The main reason this is good news for the Australian economy is that not only is the housing stock increasing due to speculative demand, but the knock on effect on construction and other industries is vast. Master Builders Australia, commenting on an Australian Bureau of Statistics release, has recently confirmed that building and construction is the nation's third largest employer, with a positive growth trend for the year.

Commenting on this activity, Master Builders Australia chief economic Peter Jones explained that "overall, industry employment is being driven by the recovery in residential building and before the full impact of the downturn in mining-related engineering construction takes effect."

This is particularly noted by some construction companies who, since moving efforts from mining to residential and commercial property, have posted significant profit for the year, increased employment, and foresee more of the same in 2015.

The Reserve Bank of Australia (RBA) has confirmed that the increased production of housing has not led to an oversupply, but may in fact help to temper the increasing price of residential real estate by introducing a greater supply to the market. It has also released research that shows construction to be one of the major beneficiaries of mining impetus, along with utilities, such as gas, power and water suppliers.

Overall, the effect of investment from both foreign and domestic sources has been to elevate the Australian economy at a time when it was most needed. While it is important going forward for the RBA to maintain a balance between homeowners and speculative purchasers to ensure long term stability, the overwhelming effect of property investment so far is that it has acted as a panacea to the country's economic woes.