Activity throughout Australia’s construction sector will remain at healthy levels over the medium term, the latest forecast suggests.

But challenges across the industry remain.

Releasing its latest forecast, Master Builders Australia said it expects the overall value of construction work done to contract by 3.3 percent next year (in 2020/21 constant dollar terms) from a forecast $225.380 billion in calendar 2022 to $217.937 billion in 2023.

Beyond that, however, Master Builders expects activity to return to growth in 2024 and to reach $240.333 billion by 2026.

According to Master Builders:

  • Civil/engineering construction activity will contract by 1.8 percent in 2023 but return to growth thereon after (refer chart)
  • The non-residential building sector (offices, retail, hotels, industrial/warehousing, public, social/cultural etc.) has a reasonable outlook with a small decline in 2023 followed by a return to growth in 2024.
  • The residential sector will experience a bumpy ride with the number of starts to contract until 2024 before returning to growth in 2025. Activity will be particularly subdued in medium to high-density housing.

It should be noted that the decline in residential is coming from an extraordinarily high base.

Indeed, the forecast low point in 2024 (174.930k starts) still represents healthy activity by historic standards.

That said, commencement numbers are likely to remain below the 200,000 which Master Builders says is needed to accommodate population requirements.

Further, Master Builders CEO Denita Wawn warns that challenges are far from over.

In residential building, Wawn says the return to normal levels of activity is being driven by higher interest rates, high inflation and ongoing worker/material shortages.

In addition, Master Builders’ members report frustrations in terms of delays in approvals for land title, building applications, and occupation certificates; shortage of land in the right places; high developer charges and inflexible planning laws.

On this score, Wawn commends Federal Labor on its plans to establish a National Housing Supply and Affordability Council.

Turning to commercial and civil construction, Wawn is concerned that Labor’s planned abolition of the Australian Building and Construction Commission may lead to more illegal activity on construction sites, higher costs and longer project rollout times.

Were it not for this, she says forecast activity levels would have been higher.


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