Apartment construction to slump in 2012: Industry survey

Apartment construction turnover is forecast to suffer a slump in the next 12 months before picking up again in 2012-13, according to the Australian Industry Group/Australian Constructors Association Construction Outlook survey for October. 

Turnover generated from the construction of new apartments grew by 2% for the 2010-11 year, but is forecast to fall by 1.2% over 2011-12 before picking up by 4.8% over 2012-13. 

Demand from the resource sector will drive the construction industry over the next two years, with engineering construction turnover forecast to increase by 13% in 2011-12 and by 14.2% in 2012-13, driven by mining investment and the strong pipeline of heavy industrial projects, led by oil and gas processing. 

Overall, the outlook for construction firms is increasing, with total turnover forecast to grow by 10.3% in 2011-12 and by 12% in 2012-13, nearly double the turnover growth of 6.3% achieved in 2010-11. 

The commercial construction sector is expected to gain momentum over the next two years, but activity will continue to lag engineering construction reflecting low levels of work in planning. 

The total value of commercial work is forecast to increase by a subdued 2.4% in 2011-12 but will pick by 6.2% in 2012-13, due mainly to a stronger impetus from private-sector investment. 

While noting the very strong outlook for engineering construction AIG chief executive Heather Ridout says it also shows that the broader building and construction industry still faces many challenges.

“Residential construction remains in the doldrums and while commercial construction shows welcome signs of life, prospects very much depend on the market segment and the location,” she says.

The report also finds that construction businesses are facing increased pressures in the procurement of building materials and capital equipment and, more significantly, worsening skill shortage bottlenecks.

More than two-thirds of businesses (68.8%) reported either major or moderate difficulty in the recruitment of qualified labour during the six months to September 2011.

While expressing concerns at the procurement of building materials and finding skilled labour,  Australian Constructors Association president Peter Brecht says the prospects for the industry are positive “underpinned by robust growth in engineering construction work and encouraging signs of recovery in the commercial construction sector”.

The survey undertaken over August and September covered the responses of 100 companies employing almost 74,000 people with combined turnover of almost $30 billion or approximately 30% of total industry activity.