Building Industry Bulletin - Issue 57, December quarter 2018
Welcome to the Building Industry Bulletin
In this issue
The Department of Housing and Public Works (HPW) engages economic research consulting firm, the National Institute of Economic and Industry Research (NIEIR) to provide independent, updated data and analysis on the profile of the Queensland building and construction industry using regional economic modelling and forecasting techniques.
The December Quarter 2018 economic update from NIEIR shows that in 2017–18 Queensland construction activity (or total work done across the residential building (houses and units), non-residential building and engineering construction sectors) increased by 3.9% to $48.7 billion.
In 2018–19, Queensland construction activity is forecast to decline by 5.0% to $46.3 billion. This is due to decreases of just under $1.1 billion in non-residential building, $796 million in engineering construction and $538 million in residential building.
In 2019–20, Queensland construction activity is forecast to grow by 3.9% to $48.1 billion due to increases of $2.6 billion in engineering construction.
Queensland engineering construction activity (e.g. roads, water, sewerage and mines) increased by 10.5% to $21.3 billion in 2017–18. Following a small decline of 3.8% to $20.5 billion in 2018–19, engineering construction activity is forecast to increase by 12.7% to $23.1 billion in 2019–20, due to the commencement or continuation of major highway (e.g. Second Range Crossing, Toowoomba), rail (e.g. Cross River, central Brisbane) and mining projects (e.g. Byerwen Coal Project, Bowen Basin).
Total non-residential building activity (e.g. offices, shops and hotels) increased by 8.1% to $7.9 billion in 2017–18. This is forecast to be followed by a decline of 13.8% to $6.8 billion in 2018-19 and a further small decline in expenditure of 2.1% to $6.7 billion in 2019–20.
In 2017–18, total residential building decreased by 3.8% to $19.5 billion with further small declines of 2.8% and 3.5% projected for 2018–19 and 2019–20 respectively. While new private dwelling construction is forecast to decline by an average of 7.5% over the 2 years to 2019–20 this is forecast to be offset by an average increase of 7.1% per annum in renovations expenditure over the same period.
The average number of people employed in the Queensland building and construction industry (residential dwelling, non-residential building and engineering sectors including contractors, trade contractors and consultants) for the year ending December 2018 was 237,000. The estimated unemployment rate for the Queensland construction industry for December Quarter 2018 was 3.8% compared to 3.4% nationally.
To help understand the state of the building and construction industry cycle in Queensland, HPW conducts quarterly research surveys with contractors and consultants registered with the department's prequalification (PQC) system. In the December Quarter 2018, Kantar Public surveyed respondents across conditions including employment supply, workloads and labour costs.
Contractors indicated on average they were operating at 64% of capacity in the December Quarter 2018, a slight decrease from September Quarter 2018 (68%). In the last 3 months 27% of contractors reported their workload had considerably decreased, the highest level since March 2016. There was continued optimism however, regarding the forward view of work and planning, with 49% of contractors believing their workload would increase over the next 3 months to March 2019 (47% in September 2018).
The majority of contractors (55%) in the December Quarter believed labour costs would remain the same over the next 3 months, while 41% believed they would increase during this period (45% in September Quarter). The perception that building material costs would rise, increased to 58% in December 2018, still significantly lower than the high point of 71% in June 2018.
In the December Quarter 2018, 17% of contractors reported difficulty employing subcontractors overall (down from 19% in the September Quarter 2018). In the same period, 36% of contractors reported having difficulty finding suitably experienced or qualified subcontractors (consistent with quarterly figures since March 2015). Of those contractors experiencing difficulties employing subcontractors the majority (59%) in the December Quarter suggested this difficulty was concentrated in a small number of trades (up from 47% in September Quarter 2018).
The trades where contractors reported the most difficulties employing subcontractors were carpentry (49%), plastering (38%) and wall and floor tiling (36%). Among those respondents who had experienced subcontractor shortages, 'increased project costs' and 'project delays' (67% and 56% respectively) were the most reported impacts mentioned by respondents.
On average, contractors estimated that 37% of their workload over the previous three months was on behalf of local, state or federal government.
Workload remained stable in the December Quarter 2018 with consultants indicating on average they were operating at 70% of capacity (71% in September Quarter). In the same period, 29% of consultants felt their workload had increased and 33% reported it had stayed the same over the previous 3 months (compared to 32% and 37% respectively in September 2018). After dropping slightly in the September Quarter, projected workload change increased to the highest level seen in 2018 with 39% of consultants in the December Quarter indicating their workload would increase over the next 3 months (compared to 22% in September Quarter).
Difficulty in finding work decreased in December Quarter 2018. Just under half of all consultants (47%) reported they were experiencing difficulties finding work, down from 58% in the September Quarter and 60% in the June Quarter 2018.
In December 2018, 34% of consultants indicated they were seeking to increase their staff numbers (up from 25% in September) while the majority (61%) reported they were planning to maintain their current staff numbers (down from 72% in September 2018). More than half of all consultants (53%) believed they would not have difficulty employing staff over the next 3 months in December Quarter with the difficulty employing staff reported by consultants showing a steady decrease since September 2017.
Of the consultants surveyed, 66% believed fees would stay the same over the next 3 months (down from 75%), 15% expected them to increase (up from 14%) and 16% anticipated a decrease (up from 9% in September Quarter).
Tender activity for Queensland Government building projects over $1 million averaged 4.3 tenderers per project in the December Quarter 2018, decreasing from 5.1 in September Quarter 2018. Looking at open tenders accepted in the December Quarter 2018 (by value) compared to the September Quarter 2018, the breakdown by project type was 98.0% for education-schools (up from 58%), 1% for hospitals/health/welfare (down from 17%) and 1% for residential (down from 4%). There was nil activity for authorities (down from 17%), administrative/offices (down from 3%) and the Civic sector (down from 1%).
The Brisbane region accounted for the largest proportion of all open tenders (by value) in the December Quarter 2018 with 62% (up from 26% in the September Quarter). This was followed by the Fitzroy (13% down from 17%), Moreton North/Sunshine Coast (10% up from 5%), Far North (5% down from 21%), Darling Downs (4% down from 15%), Mackay (3% up from nil), Wide Bay Burnett (2% down from 4%) and North West regions (1% up from nil). No activity was recorded in the Northern (down from 9%). Moreton South/Gold Coast (down from 3%), South West and Central West regions (both nil in the previous quarter).
There was higher than average tender activity for projects within the education-schools sector and within the Moreton North/Sunshine Coast region during the December Quarter 2018.
In the December Quarter 2018, building materials monitored by HPW that recorded an increase from the previous quarter were float glass tinted – 4mm thick (2.4%), face bricks – clay (1.8%) and aluminium fixed windows (0.9%). No materials recorded a decrease during this period. According to the Cordell Building Cost Guide, between December Quarter 2017 and December Quarter 2018 the most significant building cost increases were face brick – clay (7.0%), mild steel sections – beams (6.0%), F8 pine 90mm x 35mm (5.3%) reinforcing steel mesh (4.8%), and 25mpa concrete (4.6%). The only material to record a decrease in cost over the 12 months was 200mm standard concrete block (-3.9%).
Special Joint Taskforce
On 28 February 2019, the Premier and the Minister for Housing and Public Works announced that retired Supreme Court Judge, the Honourable John Byrne will be leading a Special Joint Taskforce. The Taskforce will be inviting and investigating matters and complaints provided through submissions in relation to allegations of fraudulent behaviour relating to building subcontractor non-payment. The Taskforce will report to Government by 30 June 2019.
Minimum Financial Requirements for licensing in the building and construction industry
Through the Queensland Building Plan, the Queensland Government committed to creating new laws that strengthen the Minimum Financial Requirements (MFR).
These reforms enable the Queensland Building and Construction Commission (QBCC) to more effectively detect licensees in financial distress and minimise the impact of potential insolvencies and corporate collapses on industry.
A new regulation strengthens reporting requirements by providing clarity about what can be included when calculating a licensee’s assets and revenue, improving data quality and the ability of the QBCC to access the data.
Informed by feedback from the industry and the community, the reforms are being advanced in phases. Phase 1 commenced on 1 January 2019 and reintroduces mandatory annual reporting, requires larger, higher risk licensees to report decreases in Net Tangible Assets of 20% or more and provides clarity about calculating a licensee's assets, such as the exclusion of recreational vehicles.
Phase 2 will commence on 2 April 2019 and will implement reforms to strengthen reporting requirements, particularly for larger, higher risk licensees. This phase will also provide stronger enforcement provisions under the Queensland Building and Construction Act 1991.
For more information please refer to the Minister's statement, Building and Plumbing Newsflash 561 (PDF, 122KB) and the department's website which also includes a link to the MFR Framework document (PDF, 181KB).
Building Ministers' Forum
The Building Ministers' Forum (BMF) comprises Commonwealth, State and Territory Building Ministers and is an important forum to help address cross-jurisdictional building industry matters. The BMF, chaired by the Commonwealth, oversees the Australian Building Codes Board (ABCB) that administers the National Construction Code (NCC).
The BMF convened on 8 February 2019 in Tasmania and the latest BMF Communique for this meeting is available at BMF Communiques.
Items considered and discussed at the BMF meeting include:
- recent events at Opal Tower in Sydney and the Neo200 building in Melbourne and the impact on residents, owners and the Australian community
- a commitment to developing a joint response to the recommendations of the Building Confidence Report
- the appropriate use of Aluminium Composite Panels (ACPs)
- a national ban on the unsafe use of combustible ACPs in new construction, subject to a cost/benefit analysis being undertaken
- the National Review of Security of Payment Laws.
Ministerial Construction Council
The Ministerial Construction Council (MCC) enables the Minister for Housing and Public Works, Minister for Digital Technology and Minister for Sport, key stakeholders and statutory bodies to discuss matters relating to the building construction industry.
The MCC met in Brisbane on 30 January 2019 and the latest Communique is available at MCC Communique.
Items considered and discussed at the MCC meeting include:
- the government priorities for 2019, as set out in the Queensland Building Plan
- implementation of the new Minimum Financial Requirements (MFR) regulation
- the Building Industry Fairness Reforms Implementation and Evaluation Panel's report which will inform possible commencement dates for the next stage of Project Bank Accounts.
Regional Round Table
The Ministerial Construction Council met at the Sunshine Coast on 12 March 2019 during the Queensland Government's Governing from the Regions. The roundtable provided an opportunity for regional representatives of industry associations to discuss many of the Queensland Government’s priorities for the industry in 2019, as set out in the Queensland Building Plan. Attendees noted the recent progress to deliver the Queensland Building Plan and the priority deliverables for 2019. The Minister also introduced retired Supreme Court Judge, The Honourable John Byrne who is leading the Special Joint Taskforce to investigate subcontractor non-payment in the Queensland building industry.
Communities across North Queensland continue the mammoth clean-up following devastating floods in February 2019. An integrated team from across HPW remains active on the ground in impacted areas and behind the scenes. Together, the team is working to recover government assets to ensure business continuity in the delivery of services to Queenslanders.
In a move to support renters, owners and real estate agents, HPW has partnered with the Real Estate Institute of Queensland (REIQ), Residential Tenancies Authority (RTA) and Tenants Queensland to establish a Rental Recovery Hub in Mundingburra. The Hub is operating seven days a week and provide expert advice on housing issues, as well as play a major role in addressing both short and longer-term housing needs.
- Last reviewed: 30 Sep 2019
- Last updated: 30 Sep 2019