Total construction activity in Australia has struggled since 2017. Forecasters predict that most of the market will remain flat or post small gains in the years ahead. Still, there are a number of bright spots on the horizon for the construction industry in the country. These are the top findings of an August 2019 report on the country’s construction market from industry association Master Builders Australia.
Here are seven other findings from the report.
Civil projects will lead the way
The civil construction sector is expected to be “the biggest winner” over the next several years, according to the Master Builders report, thanks largely to the ramping up of government-led transport infrastructure projects. Forecasters predict the best bets coming in civil are in oil and gas, rail construction and roads, while electric, recreation and telecommunications appear “to have peaked and are beginning to contract,” the report said.
Residential growth is still struggling
Due to a raft of circumstances such as lower birth rates, declining migration and an overbuilding of housing before 2017, residential growth has flattened in Australia and is expected to decline in the coming years, the report said. Expert estimates put residential projects at about 168,000 for 2020, which is 28% lower than the peak in 2017.
Commercial growth will struggle, but not in every sector
Commercial growth in the Australian construction market has been a “star performer” over the last couple of years and is forecasted to touch new highs in 2020, according to the Master Builders report. However, such above-average growth is expected to fall back to normal levels in the years ahead, the report said. Office buildings, education and accommodations will contract significantly, and although transportation, health and retail have much more favorable projections, they aren’t enough to overcome the general slowdown. Expect that the drop in commercial growth will also lead to more spaces originally designed for offices to transition to other uses, as people continue to switch to off-site or shared workspaces.
Fewer new homes, but more renovations
If you’re in the Australian home-renovation business, there’s good news—the ultra-low interest rates for loans are expected to help many Australians finally open up their floor plans or redo their kitchens. This is particularly true for detached houses built in the late 1980s.
Major construction firms are increasingly ‘green’
The largest construction firms in Australia—those handling the majority of the country’s big projects—are “greening” their practices and approaches. For example, CPB Contractors, Australia’s largest construction company, has made environmental and sustainable solutions part of its approach to every project. Lendlease, the multinational Australian builder and property manager, has been recognized five years in a row by the Global Real Estate Sustainability Benchmark (GRESB) as the world’s most sustainable property fund. Investors and builders in Australia and around the world are choosing more sustainable practices; small- to medium-sized builders might benefit by following their lead.
Modular and prefab will increase market share
Most Western countries like Australia rely on traditional stick build methods and consider modular or prefabricated construction cheap or tasteless. Asian and Nordic countries, however, have long made prefabricated elements and even entire homes a significant part of their market. In recent years, prefabricated and modular homes have grown more popular in Western countries for their cost savings and diminished environmental impact. And while the market for prefabs is only about 3.5% in Australia, that is expected to double in the coming years as quality and design improves.
Technology is speeding up the business
It might feel like construction sites are increasingly out of science fiction, with GPS-enabled equipment, wearable technologies, drones and digital documents such as blueprints and checklists. The result of this is that work happens faster, with better organization and with much tighter supply lines and schedules. Contractors will be well served to implement new technologies to keep their competitive edge—or at least understand and have a flexible attitude toward technology as the larger firms lead the way.
