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Industry Forecast: changing landscape for construction market

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Posted by PlantMiner
With the resources boom over, it's a good time to build.  During the past few months, as state budgets continue to be handed down, numerous sources have weighed in on what they think construction will look like in the next financial year, and much of the optimism comes from the building sector.

The recent International Construction Market Survey details what changes we should expect:

Economic Overview

Economic growth is slowing in Australia and interest rates are at a record low. As the natural resources boom comes to an end, projects in that sector are complete or completing with few new projects in the pipeline. A falling exchange rate will help balance the economy, benefitting industries such as tourism, education and agriculture.

Construction markets and trends

The residential property sector is making a comeback with Sydney leading the way due to cuts in interest rates in early 2014 and other states are set to follow. There are major infrastructure projects underway and planned such as the Sydney Metro Northwest, Sydney Metro City & Southwest and the Melbourne Rail Link.

However, tight government budgets are a constraint for this sector.

Tender Price Outlook

Strong competition is keeping tenders competitive in the majority of markets. Australian cities are expecting only moderate tender price increases of around three percent in the next 12 months.

Future Outlook

With the exception of Sydney's apartment market, the cost of construction is flat and the outlook moderate over the medium term. Labour availability has improved significantly. Wages are forecast to be flat in real terms or even falling in locations such as WA. Materials prices are also forecast to be flat or falling.

Overall, this is a good time to build.

Construction costs should remain fairly stable although some residential construction trades may become increasingly difficult to source, adding pressure to costs.

 

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