Building forecast looks brighter

Last November’s building industry forecasts were not optimistic, projecting a $2–4 billion downswing over the next three years. Times have changed, it seems, with the upcoming Australian Construction Industry Forum’s (ACIF’s) forecasts painting a more buoyant picture.

Early indications of the May projections show the prospects across the various building and construction sectors vary with some hotspots but also some areas that are slowing, particularly now that the economy is absorbing both the end of the mining boom and the peak of the residential housing boom.

Data are still being prepared, incorporating information from Australian Bureau of Statistics, Cordell Information and other sources, and will be launched at a business leaders breakfast on 5 May, ahead of the industry release on 12 May.

ACIF Forecasts undergo a peer review process to ensure that all drivers of change are factored in and the draft reports will soon be presented to the Construction Forecasting Council, a panel of economists and researchers from across the industry plus banks and other specialists, who come together to ‘reality test’ the ACIF information.

“We are still analysing the data for the next ACIF Forecasts; however, what preliminary data and analysis is showing is that the building and construction industry still plays a significant role in the economy. In particular, residential building work is one of the few areas of steady and strong growth in the economy,” said Kerry Barwise, head forecaster of the ACIF Forecasts.

“Doom-and-gloom sentiments sometimes seen in the media are out of step with the preliminary numbers, and in some areas are spooking the industry and its clients. For example, engineering construction is not facing an unexpected freefall. Some 3000 new projects in engineering construction have been added to the ACIF major projects list since late last year, offsetting those that have recently been completed, put on hold or terminated.

“Our national sector chart from November 2015 clearly shows the peak and then also the dip we are forecasting. We are seeing some big shifts in the numbers for May 2016 in the composition and location of construction work. Activity in the dip is lower than in the peak of the mining boom — pretty well as expected — but engineering construction will not disappear altogether,” said Barwise.

There is a notable increase in the number of active road and rail transport projects in the major projects database and much of the spending on the NBN is now coming into the construction sector work pipeline.

Residential housing is the focus of industry and general media comment at the moment, as it is clear that the frenzy for homes, both detached and attached, is running out of puff. However, commentators spruiking a crash today or tomorrow are out of touch with what is actually happening, as there is a lot of work yet to come and buyers lining up to buy given still low interest rates.

“Preliminary data up to the end December 2015 shows that residential building work actually done grew again to record high levels. Dwelling approvals and commencements data shows that there is still growth in the home building pipeline. As reported in November 2015, the amount of residential building work to be done this financial year [ending in June 2016] is still likely to be larger than the previous peak in 2014–15. We are carefully reviewing the latest data to confirm the residential building outlook for the May 2016 Australian Construction Market Report,” said Barwise.

“The building and construction sector contributes around 8% to GDP, and it is crucial that we have detailed forecasts on all key subsectors that drive this important component of the economy. ACIF’s forecasts provide the industry with key forecasts across the residential, non-residential and engineering sectors, giving industry participants the quality information they need to make more informed investment and business decisions,” said Adrian Harrington, chair of the Construction Forecasting Council.