Northern Territory Construction Boom Half Over

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Monday, December 29th, 2014
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As a huge gas project moves toward completion, the current boom in building and construction activity in the Northern Territory is half over.

Over the past three years, a combination of work associated with the massive Ichthys LNG Project and, to a lesser extent, the $500 million Darwin Correctional Precinct along with rising demand for new houses saw the dollar value of building and engineering construction work done throughout the Territory more than double from $2.160 billion in 2010/11 to $4.867 billion in 2013/14.

Now, with Ichthys more than half complete and the new prison open, the pipeline of projects is shrinking notwithstanding reasonable levels of optimism regarding population growth and the broader economy which is expected to underpin continued healthy levels of new home building.

Accordingly, Australian Construction Industry Forum (ACIF) expects activity to drop back to more historically normal amounts of just under $3.2 billion by 2017/18, whilst Deloitte reckons the value of private sector construction investment will decline by almost two thirds (to drop back to normal levels) over that time frame.

Below is an outline of current market conditions and forward expectations for the territory in terms of residential construction, non-residential building, engineering construction and construction industry employment.

Residential Construction

Having peaked in 2013/13, the number of commencements in new residential construction has now stabilised, and the Housing Industry Association expects activity to remain at historically elevated levels for at least the next couple of years.

Strong population growth should help – Deloitte expects annual growth in the number of residents of just under three per cent per year until 2017/18 – as should reasonable levels of household confidence and expenditure and – for now – loose monetary policy settings.

Building approval data is encouraging: at 1,685, the number of new houses and apartments approved for construction within the first 10 months of 2014 was at its second highest level compared with any of the previous corresponding periods over the past five years.

Meanwhile, the HIA reckons the dollar value of investment in renovations of existing homes will bottom out at a horrible low of $214 million in 2013/14 and increase to a more respectable $277 million by 2016/17.

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Non-Residential Building

With the new correction centre now complete, ACIF expects the value of non-residential building work done throughout the Territory to drop back from a peak of $1.127 billion in 2013/14 to just under $700 million by 2016/17 notwithstanding generally positive expectations for the broader economy amid a limited pipeline of projects – albeit with work on new military housing, facilities and accommodation to keep activity at historically respectable levels.

The healthcare sector is expected to be the pick of the bunch as work on the Palmerston Regional Hospital lifts activity in that area (see chart).

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Engineering Construction

Likewise, the dollar value of work done on civil construction facilities is expected to drop back from its peak of around $3 billion over the past two years to $1.673 billion in 2017/18 as the Ichthys project moves progressively toward completion.

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Employment

While employment within the sector is currently running hot, ACIF expects the number of people employed throughout the construction sector within the Territory to ease back and average levels of around 12,000 to 13,000 by 2016/17 and 2017/18 as the anticipated wind back in activity takes hold.

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