Momentum in the New South Wales construction sector is expected to roll on as a combination of easy monetary policy, reasonable levels of population growth and high levels of pent up demand underpin continued momentum in new housing construction, reasonable economic conditions underpin respectable levels of demand for office, retail, industrial and accommodation space and a build-up in public sector infrastructure offsets a pull-back in resource and electricity investment in civil construction.
The Australian Construction Industry Forum (ACIF) expects the overall dollar value of construction work done throughout the state to rise from already elevated levels of $42.591 billion in 2013/14 to more than $46 billion by 2016/17.
Meanwhile, with the state having put on more than 65,000 new workers over the past 12 months, the sector’s jobs market is booming, and is expected to continue to do so for several years.
Moreover, while current plans for a significant public infrastructure spend are obviously subject to the results of next month’s election, it appears investment in this area will remain reasonably buoyant irrespective of the outcome. The main opposition Labor Party has announced what appears to be a modest but still respectable program of capital works, though Labor's program appears less fulsome than that planned by the incumbent Liberal government as Labor opposed the sale of public assets in order to pay for new infrastructure.
Below is an outline of the state’s outlook for residential construction, non-residential building, engineering construction and construction sector employment:
Thanks largely to a combination of low interest rates, reasonable levels of population growth and a significant volume of pent up demand following several years of low building activity, conditions in the market for new residential construction are running hot, with both the detached housing and multi-residential sectors experiencing elevated levels of activity.
Going forward, the Housing Industry Association expects commencement volumes to peak in the current financial year but remain elevated until at least 2017/18. The value of investment in home renovations, however, is expected to remain at modest levels over that time frame.
Thanks largely to a rebound in office, retail and industrial building activity along with reasonably buoyant levels of investment in healthcare and educational facilities, the dollar value of work done on commercial buildings throughout New South Wales has bounced back of shocking lows of $7.766 billion in 2011/12 and is expected to reach almost $10 billion in the current financial year.
Going forward, overall levels of activity are expected to remain at around current levels as a drop-off in work on schools and education facilities is offset by a solid pipeline of new office towers and existing building refurbishments in places like Barangaroo and the CBD, a range of industrial and shopping centre projects and a recovery in hotel and accommodation building activity.
Key upcoming projects (information from Cordell, current as of November 2014):
- Sydney Central Station Airspace Redevelopment – Overall, $10 billion, redevelopment of Sydney Central Station Precinct, start: March 2017, status: early
- The Bays Precinct, $1 billion, urban renewal development, start Apr 2016, status: early
- Barangaroo Central – Development Blocks 5, 6 and 7, $750 million, start: Jul 16, status: possible
Not having had the massive ramp up in resource sector work of some of the mining states, New South Wales is not experiencing the same pull-back in civil construction activity as some of the other states. For this reason, aggregate levels of engineering construction activity over the next few years are expected to be only slightly lower compared with current levels as a ramping up of public sector investment in road and transport projects as well as stronger telecommunications sector work thanks to the National Broadband Network almost fully offsets a pull-back in resource and pipelines and electricity investment.
Key upcoming projects (information provided by Cordell, current as of Nov 2014):
- WestConnex – Overall Project, $11.5 billion, road project linking Sydney’s western suburbs to the city, airport and port, start date: Jul 15, status: early
- Pacific Highway – Woolgoolga to Ballina, road upgrade, $5 billion, start: June 15, status: registrations
- Badgerys Creek Airport – Infrastructure Project, start: Feb 16, status: early
Courtesy of the aforementioned buoyant operating conditions, current conditions in the market for labour in the construction sector throughout New South Wales are extremely buoyant, and the state has added a whopping 65,500 employment positions in the past year alone to send the sector’s employment level to record highs.
Hays Construction business director Ronan Mulry said there is strong demand for construction professionals throughout the state in all disciplines, with high rise residential and commercial experience being sought after the most and experienced site managers, contract administrators and estimators having a range of employment options.
Longer term, ACIF expects overall employment levels throughout the sector to remain at historically high levels of above 310,000 for at least three years.