Robert’s Building Industry Update, September 2019
Robert Caulfield’s 41 years as a leading Architect gives him a unique understanding of the building industry in Australia. He is able to identify commercial opportunities and can produce designs that achieve profitable results.
A combination of factors including the Banking Royal Commission, tightening bank lending procedures, the Aged Care Royal Commission and concerns about apartment buildings have all contributed to a significant decrease in building activity. In the 12 months to July 2019, residential building approvals fell 24% nationally, mostly driven by a drop in apartment construction. ACT recorded the largest drop, a staggering 63.5%.
|Residential Building Approvals |
12 months to July 2019
The national monthly fall in July was 3.2%, indicating that dwelling construction numbers are still falling.
The delay between approvals and construction activity in the non-housing sector can be six to twelve months, meaning that there is not likely to be a shortage of labour or materials for the remainder of 2019 and possibly much of 2020. As a result, construction prices have not moved significantly over the last twelve months and are likely to remain flat for the next twelve months.
The Aged Care Royal Commission appears to have slowed aged care construction with many operators waiting to see if the results of the royal commission will impact the way these facilities need to be designed and managed. Hopefully there will be greater certainty in the aged care sector by early 2020. It is likely that construction costs for aged care will remain competitive, so it is probably a good time to get forward planning principles and concepts in place.
Anecdotal information from CKA Group’s Shanghai office indicates that there remains a modest slowdown in domestic construction activity and surprisingly, in government construction in China. This is partly due to a nationwide investigation into corruption in government building contracts which has “spooked” local and provincial government officials and slowed the issuing of contracts. The China/US trade war is also beginning to have an effect on the production and export of building materials. This could mean that more Chinese building products will be directed to Australia and other overseas markets meaning more competition between product suppliers and unlikely cost increases in imported items such as plumbing, electrical fittings, kitchenware, glazing etc. Offsetting this advantage is the ongoing concern that many imported building products are not in accordance with Australian standards.
In summary, building prices are very attractive at the moment and are likely to remain stable for the next twelve months.