As the researchers, compilers and publishers of the Rawlinsons Construction Handbook and Cost Guide, we hold the most current pricing in Australia. In this unpredictable economy, our Editor and Director of Publishing, Matthew Roddis, comments on the Australian Construction Sector and relative pricing adjustments.
Rising construction costs continues to be an issue experienced across all sectors in the construction industry, which is due to skilled labour shortages, supply chain disruptions, and volatility in key construction materials. Low levels of immigration, coupled with strong construction activity, means contractors are less likely to reduce margins and take-on significant risk. Furthermore, the war in Ukraine continues to add further strain on the already disrupted supply chain, also fuelled by high material and energy prices as a result of the COVID-19 crisis . Due to these factors, it is likely that construction costs continue to increase for remainder of 2022, before potentially easing in 2023.
- The price for timber supply have increased by up 12.5%
- The price for concrete supply have increased by 6%
Existing industry wide upward cost pressures will continue to roll on well into the current quarter and the foreseeable future. Added to this, fuel and energy costs are anticipated to start showing increasing signs of their impacts. Longer project duration times, from the norm, are set to continue, while company insolvency concerns, continue to remain a growing concern and occurrence within the industry. Despite the upward cost and other issues prevailing, the level of general industry activity is expected to remain positive and generally strong.
- The price for LVL and laminated beams have increased by 5-10%
- Prices for plasterboard supply have increased by 3-5%
The protracted supply chain issues continue to adversely affect the cost of construction projects, lead in times and availability are also obstructing the smooth progression of the construction program. With the borders reopened, the free movement of labour is yet to fill the skilled shortages previously encountered. The residential market is becoming hesitant due to the current and potential interest rate increases. All signs point to a suppressed market that cannot achieve it’s potential for the remainder of the year.
- Prices for insulation supply have increased by 10-30%
- Price for proprietary steel framing supply have increased by 50%
While building approvals continue to soften, the level of activity remains high through the execution of existing projects. The moderation of price increases is not anticipated to be realised until 2023, due to a combination of high inflation, low unemployment and continued supply chain and global instability.
- Prices for blockwork laying (200mm) have increased by $50/sqm
- Prices for reinforcement supply have increased by $150/t
All sectors are still maintaining steady growth, in particular the residential sector, notwithstanding the challenges associated with material supply and labour constraints. It is anticipated that increasing construction costs for all sectors will continue into 2023, where it is expected to moderate. Bank funding for the small to medium residential projects is still very strong. The increase in interest rates will impact on residential activity, but this will not be obvious until early 2023, due to the backlog of work still to commence / complete. It is anticipated that the new State Government will implement a strong capital works programme, particularly in the health sector. Geo/political, energy supply, inflation and ongoing interest rate rises will add further to the challenges/cost pressures confronting all sectors of the economy going forward.
- Prices for reinforcing steel have increased by 20-25%
- Prices for timber supply have increased by 15%
Industry pressures remain resulting in a buoyant yet over stretched construction sector. Shortages in all facets of the construction industry continue to put upward pressure on tender pricing with negotiated contracts now favoured simply as a means of attracting a potential builder. Reduced contractor availability along with material supply issues continue to increase timeframes for project commencements and completion. Housing shortages also remain a primary concern with the increasing population and investment levels causing growing pains.
Currently the NT Government is providing stimulus to construction trades to keep the industry moving but we do not expect significant change from what is currently a quiet market. There is concern however that the territory with its precarious economy and spending large sums of money on recovery and stimulus packages may compromise the funding of capital projects into the future, as it has done for the previous few years when private investment has been and remains at historic lows. The weak NT economy and lack of private investment it is not clear how long the government can maintain sustaining the various industries but with NAIF and Defence funded projects in the planning and delivery phases we expect the industry to maintain a steady low key course. A number of Defence projects are in delivery phase causing the construction industry to remain buoyant and utilising existing spare capacity. Residential construction is being maintained and housing projects in remote communities are progressing. A number of road infrastructure projects are also being committed. We predict slight price rises over the next quarter as spare capacity reduces in the market.
Construction industry is at full capacity particularly the Residential Sector - however, the industry has been beset with price increases, material supply delays and now labour shortages. There was a 9.5% increase in material prices to December 2021 and while further price increases have filtered through in the last six months, material supply delays due to an national overheated market overlaid by international issues are having significant effects both with material supply delays and programme extensions which has not been helped by labour shortages due to general availability of skilled labour, over commitment and COVID-19.
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