The value of work in the multi-level residential construction sector is set for a major downturn, as tighter lending conditions and surging construction material costs weigh on the profitability of the sector.
The commercial building and infrastructure sector continues to buoy the flagging apartment and residential sectors, with engineering construction forecast to remain a key driver of growth rising to a total turnover of 12.6 per cent in 2019 from 8.4 per cent in 2018.
A survey by the Australian Industry Group and the Australian Constructors Association is forecasting a solid uplift in major non-residential project work over the course of 2018-19.
The total levels of non-residential construction work are forecast to rise 9.3 per cent in 2018 with a further 8 per cent lift the following year.
Growth will be led by a strong pipeline of non-mining infrastructure work in line with surging levels of public spending into transport infrastructure.
"Implementation of the projected forward pipelines of government infrastructure projects would enable the industry to plan its activities with some level of comfort over at least the next decade,” Australian Constructions Association executive director Lindsay Le Compte said.
A significant 16.6 per cent fall in apartment building is forecast for 2019, after the continuation of growth in the sector this year is supported by projects currently under way or in the pipeline.
AI Group chief executive Innes Willox said that despite the changing composition of activity in the sector, further gains are expected for the rest of the year and into 2019.
“While the composition of activity is set for further changes heading into 2019 – most notably with a significant fall in multi-level apartment building – overall growth in both business activity and the construction workforce is set to continue.
“With conditions buoyant, there are clear signs of emerging supply constraints, input price rises and wage pressures and increasing reports from constructors about their difficulties finding skilled staff.” Willox said.
Meanwhile, Australia’s construction sector expanded at the slowest pace in more than a year in June, according to the Australian Industry Group’s monthly performance of construction index, which fell to 50.6 points last month, marking its lowest level in 17-months.
Ai Group head of policy Peter Burn pointed to stable conditions in the construction sector in coming months.
“The residential sub-sectors detracted from the industry’s momentum with apartment building continuing its orderly retreat from boom conditions and house building stable in June,” Dr Burn said.
“Looking ahead, new orders were broadly stable overall with a sharp drop in additions to the apartment pipeline offset by modest gains in orders for new work in other sub-sectors.
While not definitive, the easing of growth in new orders points at best to stable conditions in the months ahead.”