With Australian housing prices declining rapidly over the past year, first homebuyers could potentially corner the market.

For years, construction in Australia has been booming — but the good days are well and truly over.

Whether it’s private houses, dwelling units, or renovations, the numbers are all heading south.

Buildings approvals have fallen for the past 14 months, dropping 6.79 per cent since January last year and 35.8 per cent from the peak in August 2017.

Just a couple of years ago Australia couldn’t get enough tradies and builders and house prices were soaring. Now the story has turned around and it’s bad news for everyone.

BIS Economics housing expert Angie Zigomanis said builders were already cuttings costs and laying off people.

“People will batten down the hatches, lay off staff, scale down to the level that the market is operating at,” he said.

“Any employer and business that’s been in the market for a number of cycles has seen it all before.”

But building is a big deal. Construction makes up almost 1 in 10 jobs in Victoria and New South Wales.

THE WORST TIME FOR CONSTRUCTION SINCE THE GFC

Nerida Conisbee, Chief Economist at REA, told news.com.au the falling approvals figures showed how hard it was for developers and everyday Australians to get financing.

She said many Aussies will start to see physical signs of the downturn on the streets of their own suburbs as the number of building sites sitting vacant increase.

“Developers are now holding sites and not developing,” Ms Conisbee said.

Ms Conisbee said a consequence of that is that work for tradies is likely to decrease, in what could be “a big risk to the Australian economy”.

“At this stage, we’re starting to hear that some developers are finding it quite difficult,” she said.

“But house and land developers aren’t doing it as tough as the apartment developers.”

Ms Conisbee said the worst will come in the next six months, in what could prove to be the deepest construction employment downturn since the GFC.

“If you look at a lot of property companies, many shed a lot of people and it became quite difficult to remain employed in that time,” she said.

“It wasn’t just hitting people on the ground building stuff it also hits town planners, real estate agents, listed property companies, there’s a wide range of flow on impacts.”

GUMTREE INDEX LEADS THE WAY

A good sign of how bad it’s all getting is an index of secondary sales of houses, land, or options to buy on resales site Gumtree.

Recent figures show prices across the majority of areas have fallen, with many owners dialling down their prices as their lots fail to sell, according to managing director of housing developers PEET, Brendan Gore.

“We’re seeing that the number of land lots is growing, many of them have already been settled, the people who are selling them own them,” he said.

“People are adjusting their prices downward regularly because they’re struggling to move them.”

He said sales on sites like Gumtree were signs land speculators were attempted to avoid costs that come with real estate agents while exiting the market.

“There’s ample supply in the market now competing against those on gumtree, on REA” he said.

LESS WORK

Nerida Conisbee told news.com.au that despite significant spending by governments on infrastructure projects, many different trades will still end up without work.

“There’s a bit of a view that high levels of infrastructure growth will pick up some of the slack but if you have a look at employment the employment profile is quite different,” she said. “Plasterers aren’t required for building a tunnel.”

This view was seconded by Angie Zigomanis who said the impact of the slowdown will be felt in all parts — not just the apartment sector.

“In an apartment building, you’re building 200 bathrooms, but you won’t do as many in an office building,” he said.

Some commentators predicted renovations would come to the rescue of the building industry, but even renovations are at record lows according to ABS data.

“The value of lending approvals for home alterations and additions have fallen to the lowest level since records began in July 2002 due to a combination of tightening lending standards,” Ryan Felsman, senior economist at Commsec said.

WORKERS HAVE 6-12 MONTHS TO PREPARE

Indeed Hiring Lab economist Callam Pickering told news.com.au that workers have already started to feel the pinch, but the worst will be felt in the next year.

He said the number of construction job postings on Indeed had “declined by about 20 per cent from its peak in December 2017”.

“Job postings are typically much more volatile than employment itself, they are one-half of the employment equation,” Mr Pickering said.

He said that with falling demand, businesses would be under pressure to cut margins in a bid to get work.

“It does suggest that the price of construction should decline going forward,” Mr Pickering said. “Developers won’t be willing to go ahead if the firms are asking too high a price.”

DEMAND UNDERSUPPLY

Shane Garrett, chief economist at Master Builders, told news.com.au he was concerned building approvals would overshoot demand on the way down.

He said a similar thing happened during the GFC, just as population growth boomed.

“When you get a depressed level of building activity plus an increase in population growth, rental prices can increase very quickly,” Mr Garrett said.

“The size of the fall is big, but the amount of activity that will still be taking place is still substantial.”

But he said the fall could have consequences in the long run, particularly if prolonged.

“If there are a number of bad years then you will have difficulty in attracting people in,” he said.

“The worry will be that we won’t be able to attract enough new workers in the industry and once things improve again we might have a labour shortage.”

David Ross is a freelance finance writer. Continue the conversation @FakeDavidRoss