For immediate release: 30 October 2012

Transcription

1 For immediate release: 30 October 2012 Fragmented outlook for the industry: updated ACIF Forecasts released online The industry s peak consultative body, the Australian Construction Industry Forum, has released the updated ACIF Forecasts on its website The ACIF Forecasts show a fragmented outlook for the industry, with improving prospects for one sector, a bleak time ahead for another, and the third sector set to peak soon before softening over the next decade. Latest construction industry forecasts show that the next twelve months will be make or break times for many businesses, from architecture and design, to building and concreting. The stagnant forecasts are the cumulative effect of international concerns economic woes of the Eurozone plus slowing growth in China, India and Brazil - moderating the growth expectations for Australia. Add to this a changing Australian economy and demographic, and the demand for building and construction is undergoing a sizable and structural shift. Depending upon work type and location, there is significant variability in how businesses are faring across the country, said Mr Peter Barda, Executive Director of ACIF. The ACIF Forecasts show that many of the cycles of the past are gone. There is a new normal, and for many, it will be poor in comparison to previous buoyant times. Businesses need to plan carefully using good quality information to find their new playing field. Pressures of a growing population with changing demographics are behind a revival for flagging residential building in most states. Significant housing shortages, estimated by National Housing Supply Council at more than 210,000 dwellings, will finally gain some relief over the next five years, however the pain and the joy continue to be spread unevenly. Residential building in New South Wales has been weak over the past 10 years and will enjoy some relief in with an expected $17 billion in residential work, with good news also for Western Australia and Queensland. New work will be mainly in units and townhouses as higher density living continues to grow in popularity. The boom in Victoria is at an end, and overall demand in that market is retreating, and a similar lowering of demand will be experienced in all other states. Businesses focussed on non-residential building won t find much joy in the Forecasts. Demand for building and refurbishment of offices, schools, retail, health and industrial building remains flat as clients delay and cancel projects, in part due to credit pressures. The Federal Government s Building the Education Revolution (BER) provided a much needed uplift however as this ends in , the sector will experience a decline in real terms unless work can be found to pull in out of the GFC-inspired slump. The ACIF Forecasts indicate that engineering construction will reach a peak in 2014 at $120 billion per year as construction for the resources sector tapers off. Global uncertainties over demand for minerals has seen some major projects put on hold, while a surprisingly high level of work remains in water and sewerage. Thanks to initiatives such as the Carbon Price Mechanism, National Broadband Network and the Renewable Energy Target scheme, this sector will continue to be the most productive industry sector for the next seven years. The changing demand patterns and work types in the industry will have a large effect on construction industry employment, with declining requirements for high skilled workers over the forecast period, with growing needs for tradespeople and low skilled workers. The type of work available, with the majority being regional engineering construction rather than urban residential and non-residential building, has seen a reduction in the number of apprenticeships available, which will have long term impacts on the skills of the industry a major concern. ACIF Forecasts are reliable, highly accurate and credible source of business intelligence for the building and construction industry. An important industry resource, the ACIF Forecasts will be available after 29 October 2012 at including tools to generate customised forecasts of demand by work type and location. ENDS ACIF Forecasts highlights and further information are provided below.

2 About ACIF Australian Construction Industry Forum (ACIF) is the meeting place for leaders of the construction industry in Australia. ACIF facilitates and supports an active dialogue between the key players in residential and non-residential building, and engineering construction, other industry groups, and government agencies. ACIF Members are the most significant Associations in the industry, spanning the entire asset creation process from feasibility through design, cost planning, construction and building and management. ACIF harnesses the resources of its Members to research and develop initiatives that benefit businesses of all sizes, from the largest of construction companies to small consultancies. ACIF s Members are: Airconditioning and Mechanical Contractors Association, Association of Consulting Architects, Australian Constructors Association, Australian Institute of Architects, Australian Institute of Building, Australian Institute of Building Surveyors, Australian Institute of Quantity Surveyors, Consult Australia, Engineers Australia, Fire Protection Association, Housing Industry Association, Master Builders Australia, National Electrical and Communications Association, National Fire Industry Association, National Precast Concrete Association, Property Council of Australia. Information about ACIF is available from Media releases from ACIF are available at About ACIF Forecasts ACIF Forecasts are rolling ten year forecasts of demand across residential, non residential and engineering construction in Australia. The Forecasts are prepared by respected economic modellers and overseen by ACIF s Construction Forecasting Council, an industry panel of expert analysts and researchers. ACIF Forecasts are used by thousands of professionals each year, from across the full range of stakeholders, from major organisations to small consultancies. Updates to the ACIF Forecasts are released first at ACIF Briefings held around Australia in April and October. More information about ACIF Forecasts is available from Contact: Peter Barda, Executive Director, Australian Construction Industry Forum Phone: , mobile: , ceo@acif.com.au Pia Argiratos, Marketing Manager, Australian Construction Industry Forum Mobile: , pia@acif.com.au More information and resources for media are available at Contact Pia Argiratos, , pia@acif.com.au or visit Page 2

3 ACIF Forecasts highlights and further information October 2012 Macro There have been significant changes in the world and local economies since our April update to the ACIF Forecasts. Events since then underpin/point to weakening demand: The Greek elections and associated instability in the financial markets. Ongoing concerns about the future of the Eurozone, and the economic impacts of a break up. Slowing in the economic growth of China, India, and Brazil. A number of recent announcements about delays and reviews for some major mining projects Downward revisions of construction activity levels over financial year in latest ABS construction data releases. Overall, the Outlook for Australian growth has moderated. The big question is how are these factors affecting demand for work? What are they doing for order books amongst consultants, builders, and trade contractors? And where? The Big Picture These two slides give a snapshot of where the pain is being felt most and where there is still demand, in real and nominal terms. The % of GDP numbers point to far reaching structural change there is a new normal emerging here, as mining dominates construction activity despite the recent well-publicised delays in some major projects, residential demand defies the fundamentals and continues a cyclical downturn, and investment in commercial building remains flat at best. This chart shows moderate growth in all sectors in nominal terms, but in real terms non-residential construction continues to flat-line. QLD: Without doubt, engineering has been the key driver in the QLD industry for more than a decade, and looks set to continue to be the star for another decade. NSW: The saddest picture of them all chronic under-supply for more than a decade, and still looks sluggish at best. SA: Engineering remains the dominant sector in SA. As global ore and energy markets return to pre-gfc confidence levels the medium to long term forecast is solid. ACT: Public sector investment in social infrastructure continues to be the dominant driver, well ahead of residential and commercial building. VIC: With the decade long boom in residential at an end, and no major resource projects to drive engineering, the focus will be on whether the non-residential sector is able to come out of its GFC-induced slump and generate more projects and jobs. WA: Without doubt, engineering has been the key driver in the WA industry for more than a decade, and looks set to continue to be the star for another decade. Contact Pia Argiratos, , pia@acif.com.au or visit Page 3

4 Residential Building All the conventional measures of demand and supply tell us that we have a serious under-supply of housing. Interest rates are low. BUT Demand remains depressed. The boom market of the last 4 years or so, Melbourne apartments has run out of steam. The basket case over the same period, NSW, is still undersupplied. We know there is pent up demand. We know too that affordability is an issue. Do the orthodox models of demand/supply work in the housing market? The models do not reflect the distortion that affordability causes the demand/supply models. What can or should government do to close the gap between demand and supply? Are governments driving some of these distortions through developer contributions and planning requirements? Is credit the problem? QLD: Expect a return to growth in 2013/14 after 2 weak years, and then strong growth. NSW: Modest growth is forecast into the 2013/14 year, followed by solid growth in new houses and apartments. SA: Short term prospects are poor, with demand set to return to pre-gfc levels well after 2014/15. ACT: Prospects for a return to growth are subdued. The trend to apartment dwellings dwarfing new house building continues to firm apartments outstripping houses by close to 2 to 1 in value. VIC: The apartment boom is fast coming to an end, and overall demand in the sector is retreating. WA: Some weakness in the short run but reasonable growth from 2013/14 onwards. TAS: Residential activity remains muted across the State, but with a strong recovery forecast from 2014/15. NT: Residential activity is in the doldrums with modest growth forecast in nominal terms from 2014/15 that is flat lining at best in real terms. Contact Pia Argiratos, , pia@acif.com.au or visit Page 4

5 Non-Residential Building The drivers of investment in non-residential vary from one asset class to another. The overall picture though is that with the exception of occasional spikes (e.g. the BER spend in 2009) the % of GDP spent on non-residential assets is in long term decline. Non-residential investment overall is growing with population, but without the structural change to white collar service industries to fill up new offices. The table below shows that the picture varies from state to state. Where is the cycle of new investment most likely to provide stronger than trend opportunities. Retail investment is defying the gloom internet sales may be eating in to bricks n mortar retail, but there is still wholesale and distribution investment, and renovation and expansion. For offices, the planned investment in Sydney s Barangaroo is the dominant driver of the nominal jump in office investment. In real terms though this sector is still poor. When it comes on line there will be a series of other projects following on as existing stock is brought up to speed. The big structural trend here is in the services sector we are doing now what the rest of the world did in GFC mark I, with a move to smaller space for office workers, and smaller leases. Companies like ANZ are consolidating their needs. Health and aged care investment remains strong, with big hospitals underway on the Gold Coast, Sunshine Coast, and Mackay, as well as Sydney and Melbourne and Perth and Adelaide. QLD: Flat across the board, with few bright spots (offices, health), countering the end of cash flowing from the BER stimulus. NSW: Retail, health, and office investment, all expected to contribute across the board in this sector in the short term (the next nine quarters). SA: Similar to residential, the present slump is unlikely to see a significant change until well into the next decade, with only some limited industrial investment a bright spot. ACT: Some growth in office and retail is forecast, but in real terms flat across the sector at best. VIC: This sector is forecast to decline in real terms overall over the short to medium term, with the exception of industrial where there is solid growth in the short term. WA: Investment in new offices and retail are drivers of modest growth in the sector. TAS: Non-residential building activity is flat, with no significant infrastructure projects on the horizon. NT: Non-residential activity is modest, with commercial building declining in real terms over the short term. Contact Pia Argiratos, , pia@acif.com.au or visit Page 5

6 Engineering Construction This sector continues to be dominated by mining, although the global uncertainty over demand for minerals is moderating activity levels. We are forecasting a still high peak but it is moving further out as caution over China and Europe moderates capital spending. Recent high profile announcements such as the delay for Olympic Dam moderate the height of the peak as well, and have a pronounced impact on specific States such as South Australia, which has a smaller engineering construction activity base to work from. There is also some risk from any potential change of government to the sector. Government policy plays a strong hand in this sector, notably through the NBN that is a key driver of telecommunications spending, but also through the CPM and the MRET, which have manifested themselves in a range of renewable energy projects. Bridges, rail, and ports, most of which is related to mining, but some urban passenger rail. Water and sewerage spending remains surprisingly high given that the major spending on desalination plants has now completed. What is driving the medium term spending and where is it happening? QLD: Continued strong growth expected from gas and mineral projects that in turn will drive investment in ports, railways, bridges to enable rocks and energy to be exported. NSW: Solid growth in engineering on the back of major road and rail expansion. SA: Notwithstanding the Olympic Dam setback, there is still strong demand in mining and related engineering over the next nine quarters, as well as telecommunications, pipelines and electricity. ACT: Roadworks are flat; water and sewerage are declining. VIC: Flat across all parts of the sector in nominal terms, declining in real terms. WA: Very strong growth continuing, driven by mega gas and minerals projects, and the investment in associated infrastructure. TAS: Non-residential building and engineering construction activity is flat, with no significant infrastructure projects on the horizon. NT: Engineering construction activity is expected to increase sharply as design, fabrication, and construction of the Impex LNG projects begins in earnest. Contact Pia Argiratos, , pia@acif.com.au or visit Page 6