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Skip Navigation LinksDepartment of Housing and Public Works > About us > Reports and publications > Newsletters > Building Industry Bulletin > Issue 53 December Quarter 2017

Issue 53 December Quarter 2017

Welcome to the Building Industry Bulletin

The Queensland Building Industry Bulletin provides updates on the latest trends within the Queensland building industry as relevant to the activities of the Department of Housing and Public Works.

In this issue

Queensland regional construction activity update

The Department of Housing and Public Works (HPW) engages economic research consulting firm, the National Institute of Economic and Industry Research (NIEIR) to provide independent, updated data and analysis on the profile of the Queensland building and construction industry using regional economic modelling and forecasting techniques. 

The December quarter 2017 economic update from NIEIR shows that in 2016-17 Queensland construction activity (or total work done across the residential building (houses and units), non-residential building and engineering construction sectors) was $45.3 billion. 

In 2017-18 total Queensland construction activity is forecast to increase by 8.4% to $49.1 billion. This is due to increases of almost $3.6 billion in engineering construction, $462 million in residential building and a decrease of $229 million in non-residential building. 

In 2018-19 total Queensland construction activity is forecast to increase by a further 6.9% to $52.5 billion with growth anticipated in the engineering construction and non-residential building sectors and a forecast decline for the residential building sector. 

Despite continued low interest rates, the level of growth in private dwelling expenditure remains slow.  After increasing by 4.1% to $19.3 billion in 2016-17, total residential building is projected to increase by a further 2.4% to $19.8 billion in 2017-18. Current building approvals indicate this will be followed by a decline of 3.1% to $19.2 billion in 2018-19. New private residential dwelling construction increased by 2.6% in 2016-17 with decreases of 2.6% in 2017-18 and 0.3% in 2018-19 projected. Renovation expenditure increased by 8.5% in 2016-17, with a further increase of 15.7% (resulting from expenditure on repairs to damage from Cyclone Debbie) in 2017-18 to be followed by projected decline of 9.5% in 2018-19. 

Total non-residential building activity (e.g. offices, shops and hotels) declined by 5.5% to $6.8 billion in 2016-17 with a further decline of 3.3% forecast for 2017-18 due to low levels of approvals for non-residential building over 2014-15. By 2018-19 stronger growth in private sector non-residential building activity is forecast, with total growth in the sector of 10.4% to $7.3 billion, as new projects move to the construction phase. 

In 2015-16 total Queensland engineering construction activity (e.g. roads, bridges, water, sewerage and mines) declined by 39.4%, largely driven by a 43% decline in private engineering construction expenditure, particularly heavy industry (e.g. highways, bridges and tunnels).   After an increase of 3.0% to $19.1 billion in 2016-17, further increases of 18.7% to $22.7 billion in 2017-18 and 14.7% to $26 billion in 2018-19 are forecast, due to the recommencement of heavy industry projects that were stalled or cancelled at the completion of the last LNG construction phase. 

The average number of people employed in the Queensland building and construction industry (residential dwelling, non-residential building and engineering sectors including contractors, trade contractors and consultants) in 2017 was 230,000. 

Building Industry and Policy Contractor and Consultant tracking survey

To help understand the state of the building and construction industry cycle in Queensland, the Department of Housing and Public Works conducts quarterly research surveys with contractors and consultants registered with the department’s prequalification (PQC) System. In the December quarter 2017, Kantar Public surveyed respondents across conditions including employment supply, workloads and labour costs.

Contractors

Contractors indicated on average they were operating at 68% of capacity in the December quarter, representing a decrease of 1% from September quarter 2017. In the last three months 82% of contractors reported their workload had either increased or remained the same (compared to 67% in September quarter). There was continued strong optimism regarding the forward view of work and planning, with 53% of contractors believing their workload would increase over the next three months to March 2018 (51% in September quarter).

Most contractors (58%) felt labour costs would remain the same over the next three months, however 38% believed they may still increase. 67% of contractors projected the cost of building materials would increase in the same period. This result was significantly higher than in September quarter 2017 (44%) and represented the highest result over the last two years.

In the December quarter, 21% of contractors reported difficulty employing subcontractors overall (down from 26% in September quarter). In the same period and representing the first decline since September quarter 2016, 31% of contractors reported having difficulty finding suitably experienced or qualified subcontractors (compared to 44% in September quarter). Over half of all contractors (55%) suggested the difficulty employing subcontractors was amongst a small number of specific trades.

The most mentioned trades for those experiencing difficulty employing subcontractors were carpentry (36%), plastering (27%), bricklaying and concreting (both 21%). Among those respondents who had experienced subcontractor shortages, ‘project delays’ (48% of contractors down from 53% in the September quarter) was the most reported impact mentioned by respondents.

On average, contractors estimated that 39% of their workload over the previous three months was on behalf of government (local, state or federal).

Consultants

Consultants indicated on average they were operating at 75% of capacity in the December quarter 2017, maintaining the upward trend since June quarter 2016 (67%). While 38% of consultants felt their workload had increased over the previous three months (compared to 41% in September 2017) the same proportion (38%) reported they had not seen a change in workload. Projected future workloads for consultants decreased slightly in December quarter with 78% of consultants indicating their workload would either increase or remain consistent in the next three months compared to 84% in the September quarter 2017.

Consistent with September quarter 2017 and representing the strongest result since March quarter 2015, 72% of consultants in December quarter reported they were not experiencing any difficulty finding work (70% in September quarter).

While 63% of consultants reported that they would maintain their current staff numbers over the next quarter, 33% indicated they were looking to increase staff numbers. The proportion of consultant anticpating they would have difficulty employing staff over the next three months significantly increased from 25% in the September quarter to 45% in December quarter 2017. 

Of the consultants surveyed, 76% believed fees would stay the same over the next three months (down from 82% in the September quarter), 17% expected them to increase (up from 9%) and 3% anticipated a decrease (down from 8%).

Prequalification (PQC) System tender activity

Tender activity for Queensland Government building projects over $1 million averaged 4.3 tenderers per project in the December quarter 2017, increasing from 3.9 in September quarter 2017. Looking at open tenders accepted in the December quarter 2017 (by value) compared to the September quarter 2017, the breakdown by project type was 54% for residential (up from 26%), 26% for Education-Schools (down from 41%), 17% for hospitals/health/welfare (up from 8%), 2% for administrative/offices (down from 3%) and 1% for civic (up from nil). There was nil activity in the authorities (e.g. police stations, court buildings, down from 22%) and recreation, education-colleges, and industrial/transport sectors (all previously nil).

The Brisbane and Far North regions accounted for the largest proportions of all open tenders (by value) in the December quarter 2017 with 40% (up from 24%) and 18% (down from 39%) of shares respectively. This was followed by the Mackay (15% up from 1%), Wide Bay Burnett (7% up from nil), Northern (7% down from 8%), Fitzroy (6% down from 10%), Moreton North/ Sunshine Coast (3% up from nil), Moreton South/Gold Coast (2% down from 3%), Darling Downs (1% down from 7%) and South West (1% down from 3%). No activity was recorded in the North West (down from 5%) and Central West regions (remained nil).

Tender activity in the December quarter 2017 was slightly higher than the average for residential and education-school projects and within the Mackay and Moreton South/Gold Coast regions.

Building material cost comparison

In the December quarter 2017, there were no building materials monitored by the Department of Housing and Public Works that recorded a decrease from the previous quarter. Building materials that recorded an increase since September quarter included float glass tinted – 4mm thick (7.9%), reinforcing steel mesh (5%), 25mpa concrete (3.2%), aluminium fixed windows (2%) and face brick – clay (0.4%). According to the Cordell Building Cost Guide, between December quarter 2016 and December quarter 2017 the most significant building cost increases were in 25 mpa concrete (8.4%), float glass tinted – 4mm thick (7.9%), reinforcing steel mesh (5%) and aluminum windows – fixed (3.8%). During this period, no materials recorded a cost decrease.

Industry news

Project Banks Accounts are required on qualifying State Government building projects from 1 March 2018

Under the Building Industry Fairness (Security of Payment) Act 2017 (the Act), building projects for State Government departments will require payments to head contractors and subcontractors to be managed through project bank accounts. 

The Act makes Project Bank Accounts (PBAs) compulsory on projects where:

  • they are tendered after 1 March 2018 
  • a State Government department is the Principal 
  • the contract price is between $1 million - $10 million including GST 
  • more than 50 percent of the contract price is for ‘building work’ 
  • the Head Contractor engages at least one Subcontractor.

Project Bank Accounts are designed to improve the security of payment for subcontractors in the building industry.

More information is available at the Department of Housing and Public Works website​.



Last updated 16 May 2018    Creative Commons Attribution 4.0 International (CC BY 4.0)

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