While the commercial construction market has been booming, the residential market had a tough year in 2019.
Chief economist for Master Builders Australia, Shane Garrett, said the good news is that new home building and transport infrastructure are set to drive construction activity higher over the next few years with commercial building likely to retreat from record highs.
The February 2020 edition of Master Builders Australia’s Industry Forecast reports have just been published and contain projections of building and construction activity out to the 2024/25 financial year across the residential building, commercial building and civil construction sectors. Individual reports are available for each of the eight states and territories.
“Having been in reverse over recent years, we predict that new home building starts will bottom out during 2020/21 at around 159,000. We then expect that residential building will expand and take dwelling commencements back above the 200,000 mark in 2024/25,” Garrett said.
“Australia needs around 200,000 new homes to be built each year to meet future population growth. Our latest forecasts indicate that we are set to fall considerably short of this requirement for a few years yet.”
Meanwhile, Garrett said commercial building activity will smash another record high this financial year before moving into reverse gear.
“Our economy is still growing well below trend. Carefully targeted initiatives aimed at stimulating building and construction can give it a big push in the right direction,” Garrett said.
Recent initiatives that have been praised by industry include the 2020 Infrastructure List which will kickstart a lot of major projects across Australia and the introduction of energy efficiency programs.
ABS data shows the volume of engineering construction work done during 2019 dropped by 11.8% compared with the previous year to record its lowest calendar year total since 2007.
“While engineering construction had a glum 2019, the same cannot be said about commercial building activity which hit a new record high last year. Residential building finished 8.1% lower during 2019,” he said.
Despite the positive commercial figures, the Australian Securities and Investments Commission (ASIC) reports the number of construction businesses that went into external administration rose from 371 in the September quarter of 2018 to 514 in 2019.
Meanwhile, over the 2018-19 financial year, 556 construction companies went under, 101 more than the previous financial year.
RiskWise Property Research CEO, Doron Peleg, said 169 NSW-based construction companies went into administration, receivership or a court-ordered shutdown in the June quarter which was the highest number since the September quarter in 2015.
According to CreditorWatch, the construction sector also topped the list for recovery court actions Australia-wide and in NSW, court actions for recovery in the third quarter of 2019 were 35 per cent higher than the comparable quarter of 2018.