The BCMI is the centre piece of the Master Builders Survey of Building and Construction and has tracked industry sentiments across over 50 separate business, economic and workforce indicators.
The survey is widely regarded as a leading source of information on sentiments in the building industry, as well as builder future expectations.
The BCMI for the September quarter 2016 shows industry sentiment holding up, despite a recent deterioration in some of the leading indicators.
Builder confidence remained on firm ground, gaining 0.7 points on the index, supported by a bounce in sales contracts and a loosening of skills shortage constraints. Performance and future expectation vary considerably across jurisdictions and industry sectors, however.
House builders for detached housing were the most positive, particularly in NSW, Victoria and Queensland where strong population growth continues to support a healthy pipeline of work on the books. These results show that while activity in inner-city apartment markets may drop off over the next two years, broader sentiment for residential builders remains positive.
The survey results are supported by the ABS statistics which show residential construction work holding up – up by 1.2 per cent in the June quarter 2016 to be 6.6 per cent up on over the year.
But areas of vulnerability remain in other segments of the market. Non-residential builders have lowered profit expectations and non-residential work-on-the-books is soft. Typically, these are good leading indicators for industry prospects, with the current results pointing to a slower period for the nation’s non-residential builders.
The CBD office markets in Perth and Brisbane remain a lingering weight on broader sectoral business conditions as the resource boom hangover continues to cast a long shadow. Other pockets of vulnerability include inner-city apartment markets, and pretty much the entire engineering construction sector.
While the index shows industrial relations constraints may have eased slightly, this view is coming from a period of elevated levels of industrial action experienced since the abolition of the ABCC. Days lost to industrial disputes in the construction sector jumped by over 70 per cent in the year-to June 2016 according to ABS data, with the construction sector accounting for more than half of all days lost to industrial disputes across the economy. This raises the cost of building and means fewer homes, schools and hospitals are built than should be.
Survey respondents in the commercial building sector, as well as a number who operate in inner-city high rise apartment markets, pointed to industrial action or the imposing threat of industrial action as ongoing concerns for their business.
Recent actions taken by the CFMEU in Queensland, including the unlawful targeting of Lend Lease building sites, is the latest in a long list of examples of the construction union’s blatant disregard for the rule of law, and highlights the urgent need for Federal Parliament to pass the ABCC legislation to even the playing field.
In terms of employment, the survey shows labour availability has loosened across the board, with all construction related occupations covered in the survey showing index values of below 50. The loosening of labour market conditions is good news, with the labour market staring to catch up to long running skills shortage in a number of occupations and location across Australia. But jobs may be at risk if building activity were to deteriorate beyond current market expectations.