Trade Shortages Worsen as Construction Boom Rolls On

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Monday, July 27th, 2015
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As the apartment building boom continues, upward pressure on construction tender prices in Australia is continuing as bottlenecks continue to emerge in some trades.

In a new report, quantity surveying outfit WT Partnerships said average tender prices across the civil, commercial and multi-residential construction sectors are likely to increase by 3.6 per cent in 2015 and subsequently by 3.8 per cent during each of 2016 and 2017.

In addition to ‘more selective tendering’ on the part of head contractors as order books continue to fill, WT says strong momentum on east-coast markets is creating a shortage of supply in a number of skilled trades.

“Trades, including partitions and linings, tiling, formwork and mechanical services, continue to experience higher tender price escalation compared with the broader market,” the report said. “Upward pricing pressure in the concrete trade is also expected to continue with a major national subcontractor recently going into administration.”

The report comes as the boom in high rise apartment building shows no sign of easing.

According to ABS figures, after seasonal factors are taken into account, more multi-unit dwellings were approved for construction in the first five months of this year alone than was the case throughout the entire year in the depths of the recent downturn in calendar 2011.

That is underpinning strong demand for workers and tradespeople. More than 17,000 workers were added to the sector’s headcount in the 12 months to May, according to ABS figures. Over the 12 months to April, meanwhile, job advertising web site Seek says advertisements for plumbing and landscaping trades grew by more than 50 per cent while ads in building trades, carpentry and cabinet making and air-conditioning and refrigeration grew by more than a quarter.

In terms of states, the WT report suggests trade shortages and tender price escalation will be strongest in eastern markets.

In particular, according to the report:

  • Rates for structural trades remain high and those for finishing trades are beginning to increase in NSW as a strong infrastructure pipeline underpins continued property sector confidence.
  • Pricing in the Tier 2 and Tier 3 market remains competitive in Victoria but tender price escalation is expected among top tier contractors and subcontractors amid continued high levels of mixed-use and multi-residential development activity.
  • In Queensland, more price escalation is expected as high levels of apartment building activity in east coast markets provides contractors with a steady stream of work.
  • Delays on several projects previously slated to commence in South Australia means there is little in the way of near-term trade supply or tender pricing pressures in that state.
  • Pricing among Tier 1 and Tier 2 contractors remains competitive in Western Australia as capacity is freed up from resource related work.
  • With a number of contractors and subcontractors having left the market in recent years, modest pricing pressures are re-emerging in Tasmania as work on the Royal Hobart Hospital project gets going and proposals for new aged care facilities increase.
  • Modest pricing pressure is also expected in the ACT, where property sector confidence is rising despite a lack of stimulus in the recent budget.
  • The WT report does not cover the Northern Territory, but it is likely that tender price pressures are fairly strong as work on the massive Ichthys project is expected to reach its peak workforce this year.
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