The report on construction activity for September indicates yet another month of contraction in the sector with interest rates a reason given for a reduction in apartment and home building areas. This is the fourth month in a row that the sector has recorded a contraction. No coincidence that it occurs at the same time as the RBA has increased rates for six consecutive months. With construction activity contracting, support through cheaper finance for operators needing to upgrade machinery can be sought from Jade Equipment Finance.
Cheaper interest rate machinery finance may be a solution for businesses to be able to acquire much-needed equipment as they ride out the current decline in activity. We provide an overview of the latest Performance of Construction Activity report and an update on construction equipment finance and interest rates.
September Construction Activity Report
The Performance of Construction Index from the Housing Industry Association (HIA) and the Ai Group has been released for September revealing 2 of the 4 sectors in deep contraction for the month. Not only is this the 4th consecutive month of contraction, but the report reveals that compared with August, the rate of the decline has also increased.
The apartments and housing sectors posted deep contraction while the commercial sector improved and engineering was stable. Commercial construction recorded the strongest performance in regard to new orders.
Reasons given for the outcomes are pressures on the demand side such as uncertainty around the economy and increasing interest rates. This is reflected in the drop in the number of new order enquiries being received for builders for houses and apartments.
On the supply side, the ongoing supply chain constraints are identified as continuing to inhibit growth. But the report does see early indications of an easing in supply chains. Employment in the construction sector also recorded an improvement.
The Chief Policy Advisor, Peter Burn, said that higher rates of interest were clearly causing a negative impact for the residential construction sectors. Mr Burn said that the delayed effect of the recent rate increase was likely to impact the residential sectors further down over the coming months. However, he also commented that apartment and house builders could take comfort from the RBA’s recent decision to slow down the rate rises.
Nicholas Ward, the Senior Economist for the HIA said that during the time of the pandemic, builders had built up an extensive pipeline of jobs and as such, it would take significant time for the effects of weaker demand to be translated into lesser activity at ground level. High capacity utilisation figures remain as the builders work through jobs in their pipeline.
The construction sector was kept extremely busy during the pandemic years, so this current contraction may be giving some builders, contractors and suppliers reason to assess their business situation. This may include a rethink of finance and loans in general or greater attention to acquiring cheaper finance for necessary machinery upgrades and replacements.
Acquiring Necessary Equipment with Cost-effective Finance
The construction sector is one of our key lending markets and we have extensive expertise and experience in securing cheaper equipment finance for operators. While many operators may be used to applying for finance from their bank, we offer the opportunity to access more lenders which increases the possibilities for acquiring cheaper rates and overall more cost-effective finance.
Our lenders include select non-bank lenders that specialise in heavy equipment and construction industry machinery. Lenders that know the sector, appreciate the challenges being faced by operators and exhibit flexibility when it comes to negotiating with our consultants for better loans.
We handle loans for all types of equipment and machinery in construction and building, excavation and civil works, materials handling and transport and others.
To suit the needs of the wide range of business structures that are prevalent in the construction sector – large pty ltd companies, SMEs, sole traders, family enterprises, partnerships and ABN holders, we offer the full gamut of loan products :-
- Chattel Mortgage or Equipment Loan
- Equipment Lease
- Commercial Hire Purchase (CHP)
- Rent to Own or Equipment Rental
The interest rates do differ and while simply opting for the lowest rate product may seem a no-brainer, the full features and benefits to an individual business should be assessed. The tax deductions and approach to the balance sheet vary and these may be more significant to a business than simply the interest rate.
A key aspect of securing cost-effective and affordable finance can be in the structure of the loan. This is another aspect where your Jade consultant will assist. The loan term, balloon or residual and any special conditions are negotiated with lenders. Achieving approval for say a longer loan term or a larger balloon may result in lower monthly finance payments. This may be the breathing space needed for operators during the current period of activity contraction.
General Business Finance Support
For operators looking for financial breathing space and not looking to acquire new machinery, speak with us about the options we can offer in regard to Business Overdrafts and Business Loans.
The construction sector is very important to us and we are committed to support operators with cheaper equipment and business finance during boom times and through the current period of reduced construction activity.
For cost-effective construction equipment finance contact Jade Equipment Finance on 1300 000 003 for a quote.
DISCLAIMER: IF MISINTERPRETATIONS, MISREPRESENTATION OR ERRORS EXIST IN THIS ARTICLE, NO LIABILITY IS ACCEPTED. THE INFORMATION IS PROVIDED ONLY FOR GENERAL PURPOSES AND NOT IN ANY MANNER INTENDED AS THE ONLY SOURCE FOR MAKING FINANCIAL DECISIONS. THOSE THAT CONSIDER THEY REQUIRE ADDITIONAL GUIDANCE OR ADVICE SHOULD REFER TO AN INDEPENDENT FINANCIAL ADVISOR.
