Apartment demand Positive news for the construction industry

A rapid increase in new apartment development has led to positive results for the construction industry despite material delivery issues that continue to hamper its recovery.

Shipments from suppliers contracted for the ninth straight month while prices and wages held steady at a strong pace, according to the latest construction performance index.

Meanwhile, major industry inhibitors are expected to continue pushing prices higher, with construction and real estate consultants RLB predicting that tender prices will increase by more than 3% per year through 2025.

Australia’s PCI results were an improvement on the summer period and its outbreak of Omicron, signaling the industry’s recovery as apartment construction surged in the index and housing approvals, particularly for apartments, have soared in recent results from the Australian Bureau of Statistics.

New orders, business activity and employment rose at a strong pace in the Australian PCI series, where readings above 50 indicate expansion and below 50 represent contraction.

Australian PCI results for March

Index Change Results
Australian IBO ▲3.1 points 56.5
Activity ▼0.4 points 56.1
Use ▲ 11.8 points 66.1
New orders ▲0.3 55.7
Housing activity ▼4.1 54.2
Apartment activity ▲6.3 56.3
Commercial activity ▲4.5 63.3
Engineering activity ▼2.7 53.6
Supplier deliveries ▲1.3 43.2
Input prices ▼1.0 94.9

^ Source: Australian PCI, March 2022

Ai Group’s chief policy adviser, Peter Burn, said the main obstacles to pressures on input prices included transport costs.

“Companies have indicated that they are recouping at least some of their higher costs in the marketplace,” Burn said.

“Unless other disruptive factors intervene, it seems likely that current levels of activity will continue over the coming months, although the ability to lift activity in the face of supply pressures becomes increasingly more difficult.”

HIA economist Tom Devitt said strong housing market conditions continue, nearly a year after HomeBuilder ended.

“Availability of land, labor and materials is the main constraint for builders, rather than lack of demand,” Devitt said.

“Associated affordability issues in the single-detached home market are likely to increase the attractiveness of units, townhouses and apartments, particularly to returning migrants, students and overseas tourists. “

Tender Price Forecast

Town 2020 2021 2022E 2023F 2024F 2025F
Adelaide 0.2% 7.1% 4.0% 3.0% 3.0% 3.0%
Brisbane 4.1% 9.6% 5.1% 4.1% 3.0% 3.0%
Canberra 3.0% 3.8% 3.8% 3.3% 3.0% 3.0%
Darwin 0.8% 1.2% 4.0% 5.0% 4.0% 4.0%
Golden Coast 4.5% 14.5% 6.7% 4.1% 3.0% 3.0%
melbourne 1.0% 3.5% 4.0% 3.5% 3.5% 3.5%
Perth 1.5% 13.5% 8.0% 4.7% 3.2% 3.0%
sydney 0.0% 4.1% 5.6% 3.7% 3.5% 3.5%
Villeville 1.0% 10.4% 8.2% 4.0% 3.0% 3.0%

^ Source: RLB Australian Report first quarter 2022

Rider Levett Bucknall’s latest quarterly tender pricing report found that the same factors influencing pricing in 2021 were seen in 2022.

This included price increases for cement, steel, PVC products and metal as well as shipping and labor charges, which are expected to continue over the next six to 12 months. .

Tender prices rose at the fastest rate in Queensland cities as well as Perth. RLB said this is expected to continue growing at just above 3% per year in all cities through 2025.

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