Australian Regional Construction Outlook
Our latest regional forecasts for residential building and construction have just been released.
Australian Construction Outlook – Overview
The construction industry is on the verge of another upturn, following three years of decline. We expect a 13% rise (in real terms) in total construction work done over the next two years (FY2022 and FY2023). Total activity should then remain similar, or edge slightly higher, through to FY2025, prior to the next decline.
A house building boom is leading the way, with rapid growth being driven by the Federal HomeBuilder scheme, other state government incentives and sustained low interest rates (in work done terms the peak will be in FY2022, although leading indicators have already started to turn down)
This report provides a concise explanation of the outlook for the various segments of building and construction. It provides a fully revised set of forecasts for all segments of building and construction looking ahead ten years.
Australian Construction Outlook – Resources
The resources construction sector experienced a modest upturn in 2020/21. If we exclude oil & gas however, the upturn has been quite substantial, with the overall sector impacted by persistent declines in gas / LNG investment.
Gas and LNG investment, is still falling from the 2014 peak, and is only expected to begin to recover in 2022/23.
Meanwhile, outside the gas sector, resources construction has doubled in the last 4 years and will reach its peak in 2021/22. Stimulatory fiscal and monetary policies across the globe, combined with vaccine roll-outs are improving economic growth and expectations, and soaring prices in iron ore, coal and other commodities all contribute to continued strength in the sector.
For more detail, and to subscribe to this report, please visit the report page.
Australian Construction Outlook – Utilities
The utilities construction sector is primed to have its third boom in a ten year period, this time underpinned by the dawn of the large-scale battery age in renewable energy construction, with additional impetus from construction of gas pipelines to meet future demand for gas on the east coast.
The first utilities boom, which peaked at $35 billion of work done in 2012/13, was partly driven by a prolonged drought, then the 2017/18 peak of $33 billion mostly came from a surge in wind and solar farms, and now we are on the cusp of the next surge, expected to reach $34 billion in 2022/23.
This outlook is supported by these key influences; the next wave of renewable energy investment, driven by the acceleration in large-scale battery storage and a continued process of decarbonisation in the electricity market, additional spending on the NBN, and a new phase of gas pipeline construction aimed at increasing sources of gas supply.
Following this next wave of construction, we forecast a downturn from 2023/24 onwards.
Australian Construction Projects Database
This latest list of projects corresponds with our fully revised set of forecasts published in November 2021.
Australian Construction Outlook – Non-Residential Building
Non-residential building activity has been booming across Australia in recent years, driven in particular by the office, education, warehouse, and short-term accommodation sectors. This upturn has now come to an end, with a prolonged 6-year downswing cycle set to take place.
While a downturn was anticipated prior to the outbreak of COVID-19, the pandemic has had its influence on the outlook by exacerbating weaknesses in some areas, but also by inspiring governments to fast-track approvals and spend more on building works themselves. This means that while private sector work done is forecast to decline in the near term, it will be offset to some extent by a temporary boost in public sector funded works.
All said, the sectors responsible for much of the downturn over the next few years will be the same sectors that led during the boom. This includes activity associated with education buildings. Meanwhile, the major growth sectors helping to support activity in the short term are health, transport, and non-residential buildings not elsewhere classified (e.g., prisons, military bases, etc.).
Australian Construction Cost Trends
This new report on the Australian construction cost outlook explains how cost growth has slowed in recent quarters, and examines the likely impact of COVID-19.
Australian Construction Outlook – Transport Infrastructure
The upcoming upturn in transport infrastructure construction will reach unprecedented levels of work done, resulting from:
- A collection of big capital city projects (road and rail),
- A ramping-up of urban renewal, maintenance and improvement programs,
- A general improvement, on a less splashy scale, of regional works, and
- Short-term stimulus spending by the Federal, state and territory governments, in order to counter the recessionary downturn from the pandemic outbreak of COVID-19.
This report provides a concise explanation of the nature and magnitude of the impacts in the various transport construction segments – road, rail, bridges and harbours. It also provides a fully revised set of forecasts, and corresponding project list, for all segments of transport infrastructure construction looking ahead ten years.
Alternative Construction Market Segmentation
This new data set provides a more meaningful picture of the construction upturn, by mining sub-segments and types of infrastructure investment.
Australian Construction Outlook – Residential Building
The positive impact of the HomeBuilder scheme, other incentives stamp duty reductions, and low interest rates, is driving a boom in Australia’s detached house building segment. The boost has been particularly marked in regional areas. Multi-unit residential, however, has not benefitted greatly from this, with a downturn continuing in this segment.
The critical time for house building will be once the positive boost from HomeBuilder starts to diminish. Then, the second of the current major factors – lower migration – will play a key role in determining how far activity falls.
At this stage, it appears that overseas migration will be quite slow to rebuild, hopefully returning to relatively normal levels by late-2023. The implication of this is that there will be a sizeable gap in demand over the next two years. While building activity in the first half of FY2022 is likely to still be benefitting from the current surge in HomeBuilder grants and approvals, the latter part of FY2022, and all of FY2023 are shaping up as a lean 18 months, with a large decline in housing starts expected.