Victoria Construction Sector Remains Strong for Now 2

Monday, March 16th, 2015
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Conditions in the construction sector in Victoria appear set to moderate but remain at respectable levels notwithstanding a pull-back in some areas of civil construction.

At the moment, sentiment in the industry is reasonably strong. In a recent survey, the Master Builders Association of Victoria said builder confidence in the state was at its highest level in more than five years and forward order books were close to their highest level in four years.

Intentions regarding employment had also turned positive, with builders reporting growing levels of difficulty in sourcing finding project managers, site managers, foremen, bricklayers, carpenters, concreters, office staff and wall and floor tilers as well as general labourers.

While the withdrawal of East West Link following the recent state election was a setback, the new Labour government does seem to have a respectable level of work in the pipeline, including the revived Metro Rail Tunnel, the removal of dangerous level crossings, a direct link to the Port of Melbourne and $2 billion in regional and outer suburban road upgrades. The timing of proposed levels of infrastructure spending, however, have been set back a little as work on the new rail tunnel is not expected to start until 2018.

That said, the aggregate level of work is expected to ease back amid a pull-back on investment in sectors such as hospitals and utilities.

Below is a sector by sector snapshot of the state’s prospects in terms of residential construction, commercial building, engineering construction and construction industry employment.


Despite being expected to ease back after a whopping peak of 55,760 this year, new housing starts are expected to remain at red-hot levels of around 50,000 in 2015/16 and remain at historically respectable levels over the following two years, meaning that activity in new residential construction is set to remain a significant area of opportunity for some time.

While the multi-residential sector is set to drop back from sky-high peaks, further momentum is expected in the detached house segment of the market.

Renovations activity, meanwhile, is set to drop back but remain at reasonable levels, meaning there should be a reasonable level of opportunity in this market.

vic housing

Commercial building

Commercial building activity is set for modest gains as opportunities in the strengthening office, retail and industrial markets more than offset the effect of a pull-back in work on healthcare projects.

Key upcoming projects (as per Cordell, updated as of November 2014):

  • Federation Square East Mixed Use Development, $1 billion, start date: Jan 2016, status: registrations
  • Telstra Headquarters, $800 million, start: July 15, status: early
  • 80 Collins Street Commercial Development (shops, shopping centres, arcade, supermarkets), $500 million, early 2015, status: firm.

vic comm

Civil Construction

While the Australian Construction Industry Forum (ACIF) expects the overall level of work done on engineering construction to drop back from just over $10 billion in 2013/14 to less than $8.6 billion by 2015/16 amid a pullback in investment in electricity and water infrastructure, significant opportunities still lie in the areas of transport and telecommunications thanks to a reasonable level of investment in road and rail infrastructure and work on the National Broadband Network.

That said, it should be noted that whereas the formerly planned EastWest Link would have stimulated activity over the reasonably near term, the biggest impact of the new Labor government’s capital works program will not really be felt until 2018 when work on the Metropolitan Rail Link gets going. It should also be noted that the forecasts below were issued prior to the last election, and that levels of investment in roads are likely to be lower and those in rail are likely to be higher compared with what the forecast suggests as a reflection of the greater focus of the new government on investment in non-road forms of transport.

Significant Upcoming Projects (information provided by Cordell, updated November 2014):

  • Australian Inland Rail Expressway, $11.4 billion, start: Dec 17, status: early
  • Loy Yang Coldry Plant, $6 billion, start: Dec 14, status: possible
  • Bacchus Marsh Coal & Gas Project, $2 billion, start Jul 2016, status: early.

vic civil


Current conditions in the market for workers and subcontractors in the construction sector throughout Victoria have eased, with ABS estimates of the number of people employed throughout the industry having dropped by 7,100 from 242,600 in the three months to November 2013 to 235,500 in the three months to November last year.

Going forward, the Master Builders Association survey provides some modest cause for optimism at least in the short term. Longer term, however, ACIF expects employment numbers throughout the industry to drop to around 213,000 by 2017/18.

With reasonably buoyant levels of activity in residential and commercial building, it is likely that demand for professionals and tradespeople will be stronger in these areas and less strong in the less buoyant civil sector outside sectors associated with transport and telecommunications.

vic employment

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  1. Gale D.

    Makes sense given the spate of expansion in the Melbourne CBD.

  2. Lindsay Mullins

    Andrew, do you have any updates on Loy Yang Coldry and Bacchus Marsh Coal and Gas?