HONOLULU (AP) Hawaii’s construction industry will slow this year and decline in the next couple years, according to a forecast by the University of Hawaii.
Despite credit concerns and a weakening housing market, the construction industry “appears to be poised for a soft landing,” as hotel renovations and industrial and commercial construction provide a stabilizing influence, according to the report from the University of Hawaii Economic Research Organization.
“While there are currently no signs of a significant and prolonged downturn in Hawaii’s construction sector, any further worsening in the availability or cost of credit will adversely impact this forecast,” said the report prepared by economists Carl Bonham and Paul Brewbaker.
Construction jobs are expected to peak at 38,120 in 2008 and decline to 37,680 in 2009. While real construction spending will turn downward, the nominal tax base will continue to rise as construction costs rise.
Construction costs have risen rapidly in the past several years driven by global spikes in prices of energy, metals and building materials rather than any significant increase in labor costs, the report said.
New home construction activity, which peaked in 2005, dropped off 27 percent in 2006. Permits are forecast to decline 4.2 percent this year, followed by a double-digit drop in 2008.
The 2006 median resale price of an Oahu single-family home was $632,000, 1.6 times the calculated affordable price of $386,000.
“This persistent unaffordability is a big reason why home building is forecast to continue to slow, bottoming out in real terms in 2009,” the report said.
Nonresidential construction activity continued rising through last year. Permits for commercial buildings are expected to dip from $1.96 billion in 2006 to $1.70 billion in 2007 and hover near $1.63 billion for several years.
Government construction contracts are expected to remain stable in the $850 million to $900 million range for the next several years.