As new home approvals surge across Australia, South Australia's biggest home builder, Hickinbotham Homes, has warned the beleaguered state is facing a sharp drop in building activity.
On the east coast, the negative economic impact of the dwindling mining boom is being offset by a red hot housing market, particularly in NSW, that has seen the nation's biggest brick maker Brickworks scrambling to bring on new plants to meet demand.
But Hickinbotham Homes managing director Michael Hickinbotham said South Australia is missing out on the action.
"The South Australian housing market is currently experiencing a very severe downturn, with a significant number of building companies having closed their doors over the last 18 months," he told The Australian Financial Review.
"There are rumours that some large interstate companies may be scaling down or leaving the state."
An anaemic housing market adds to the woes facing SA Premier Jay Weatherill.
Already struggling
South Australia is already struggling with the highest unemployment of any state, the exit of car manufacturing and uncertainty over the future of the state's ship building industry.
Housing Industry Association chief economist Harley Dale said the weakening state economy is taking housing down with it. "The unfortunate reality in the here and now is that the SA economy is weak and the new home building sector is weakening quite considerably," he said.
"We could be in for a 10 to 15 per cent fall in new home building activity that could take us back to some of the lowest levels we've seen in the last 15 years ? we are building record numbers of homes in Australia at the moment ? but it is quite a divergent profile for South Australia."
The possibility of a sharp drop in building raises questions about the demand for building materials and could affect sales for companies such as ASX-listed Adelaide Brighton.
In February Adelaide Brighton reported record full-year revenue of $1.34 billion. The company said it expects reduced cement sales in South Australia in 2015, but that these declines would be "offset by new contracts and improving demand".
Adelaide Brighton chief executive Martin Brydon agreed the state is under pressure, but said residential housing "looks OK".
Tough gig
"The government there has a tough gig, but while the economy is going to find it rough, with manufacturing of cars and submarines coming out, the impact on cement is not that great," he said.
"We've got activity coming off in South Australia. We think pre-mixed concrete will be down about 6 per cent on the prior year ? but I think our products will not be off materially."
Mr Brydon said that South Australia is not a big market, taking about 800,000 tonnes of cement. Approximately 30 per cent of Adelaide Brighton's exposure in the state is to residential building.
Listed peer Boral singled out "challenging conditions" and "muted demand" in South Australia at its half-year result in February. Earnings from the group's building products division more than doubled to $14 million in the half.
Mr Hickinbotham said there is some "light on the horizon" following the Weatherill government's recent move to stimulate the industry and state economy by engaging the private sector to redevelop tracts of housing trust stock in inner-city areas.
About 4500 housing trust homes will be made available for redevelopment over the next five years.
"The industry has welcomed this announcement," Mr Hickinbotham said.
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