The Australian Construction Industry Forum (ACIF) forecasts that the decline in Residential Building will be so deep that it will dominate the outlook for building and construction, dragging down economic growth and employment. The outlook has been detailed in the latest Australian Construction Market Report, released today. ACIF indicates there have been recent signs of improvement in some markets, but it will take time for the impact to be felt throughout all building and construction markets.
“The lowest interest rates on record have been reduced even more, despite this access to finance and credit has presented a significant hurdle to developers, builders, investors and owner occupiers. Market adversity has encouraged builders to withdraw from development of new projects; we witnessed new dwelling approvals plummet last year and commencements have also fallen. A fall in residential building activity is locked into the pipeline and this will take a while for this to be put into reverse,” said ACIF Construction Forecasting Council Chair Bob Richardson.
Residential Building Activity
Residential Building work fell 0.4% last year (2018-19). A much deeper contraction of 8.4% is expected this year (2019-20), dragging the value of work done down to $96 billion. The rebound in building activity is expected to be delayed until 2021-22. The drop in activity will be difficult to avoid despite recent improvements in house prices because it will take time to restore approval numbers, secure land and commence new projects and address other ‘lags’.
Building and Construction Work Done ($ billion)
Non-Residential Building Activity
In marked contrast to Residential Building, Non-Residential Building activity is midway through a growth phase. Expanded business investment in Accommodation, Industrial and Offices, and Public sector investment, especially in Education and Defence. Growth is expected to continue through the remainder of this year and into 2020-21. This will raise activity to peak at $45 billion.
Infrastructure Construction Activity
Work done in Infrastructure Construction contracted by 5.5% last year to $62 billion. This reflected the completion of large projects, and delays in shifting to new projects which are often in different sectors and geographies. Infrastructure construction activity is expected to return to growth in line with expanded plans and programs, raising work done to $66 billion in 2019-20 and $68 billion in 2020-21.
Total Building and Construction Activity
While the downturn in Residential Building activity is expected to deepen this year, the depth of the decline will be offset by increases in other building and construction activities. The expected rebound in Infrastructure Construction spending will be too little too late to prevent a fall in total building and construction activity this year. Growing Infrastructure Construction spending will be sufficient to stabilise the amount of building and construction work to be done in 2020-21 and lead to a return to growth in 2021-22.
Employment in building and construction
Construction employment is projected to fall 2% to 1,159,000 jobs over this year, reflecting the significant decline in Residential Building activity that will be difficult to avoid. This is a concern because Residential Building is the most labour-intensive type of building and construction. Construction employment is projected to track sideways for 2-3 years based on relative stability in the level of total building and construction activity.
Building and Construction Activity in Summary
Total building and construction work fell 8.2% last year to $233 billion. A further fall of 1.7% is expected this year (2019-20). Most, of the large losses in Residential Building activity are expected to be offset by increases in Infrastructure Construction and Non-Residential Building.
About Australian Construction Industry Forum (ACIF)
Australian Construction Industry Forum (ACIF) is the trusted voice of the Australian construction industry. ACIF facilitates and supports an active dialogue between key players in residential and non-residential building, and engineering construction, other industry groups, and government agencies. ACIF’s focus is on innovation, collaboration, equity and sustainability for the industry. More information on ACIF is available from www.acif.com.au.