Building Industry Bulletin - Issue 58, March quarter 2019
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 March quarter 2019 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 4.0% 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, $690 million in engineering construction and $652 million in residential building.
In 2019–20, Queensland construction activity is forecast to grow by 2.7% to $47.5 billion due to an increase of $2.2 billion in engineering construction.
Queensland engineering construction activity (e.g. roads, water, sewerage and mines) increased by 10.5% to $21.2 billion in 2017–18. Following a small decline of 3.2% to $20.6 billion in 2018–19, engineering construction activity is forecast to increase by 10.7% to $22.8 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 14.1% to $6.8 billion in 2018–19 and a further decline in expenditure of 3.1% to $6.6 billion in 2019–20.
In 2017–18, total residential building decreased by 3.7% to $19.6 billion, with further declines of 3.3% and 3.9% projected for 2018–19 and 2019–20 respectively. While new private dwelling construction is forecast to decline by an average of 7.8% over the 2 years to 2019–20, this is forecast to be offset by an average increase of 6.1% 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 March 2019 was 240,000. The estimated unemployment rate for the construction industry for March quarter 2019 was 3.7%.
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 March quarter 2019, Kantar Public surveyed respondents across conditions including employment supply, workloads and labour costs, with all data reported by quarter.
Contractors indicated on average they were operating at 66% of capacity in March 2019, a slight increase from December 2018 (64%). In the last 3 months, 23% of all contractors reported their workload had considerably decreased, down from 27% in December 2018. There was also continued optimism regarding the forward view of work and planning, with 46% of contractors believing their workload would increase over the next 3 months to June 2019 (49% in December 2018).
Consistent with December 2018, the majority of contractors (55%) in March 2019 believed labour costs would remain the same over the next 3 months, while 40% believed they would increase during this period (55% and 41% in December respectively). The perception that building material costs would increase, rose to 61% in March 2019, still significantly lower than the high point of 71% in June 2018.
In March 2019, 18% of contractors reported difficulty employing subcontractors overall (up from 17% in December 2018). In the same period, 29% of contractors reported having difficulty finding suitably experienced or qualified subcontractors, representing a continued decline since the peak of 46% in June 2018. Of those contractors experiencing difficulties employing subcontractors, the majority (58%) in March 2019 suggested this difficulty was concentrated across 1–2 specific trades (consistent with December 2018, but up from 47% in September 2018).
The most mentioned trades for those experiencing difficulty employing subcontractors were wall and floor tiling (48%), plastering (42%) and carpentry (33%). Among those respondents who had experienced subcontractor shortages, 'increased project costs' and 'project delays' continued to be the most reported impacts mentioned by respondents.
On average, contractors estimated that 41% of their workload over the previous 3 months was on behalf of local, state or federal government.
Workload remained stable in March 2019 with consultants indicating, on average, they were operating at 67% of capacity (down from 70% in December 2018). In the same period, 22% of consultants reported their workload had considerably decreased over the previous 3 months (up from 13% and 9% in December and September 2018 respectively). The projected change in workload decreased slightly in March 2019 with 30% of consultants indicating their workload would increase over the next 3 months (39% in December 2018).
Difficulty in finding work increased in March 2019. More than half of all consultants (57%) reported they were experiencing difficulties finding work, up from 47% in December 2018.
In March 2019, 24% of consultants indicated they were seeking to increase their staff numbers (down from 34% in December 2018), while the majority (65%) reported they were seeking to maintain their current staff numbers (up from 61% in December 2018). The difficulty employing staff reported by consultants has remained consistent since September 2018 with more than half of all consultants (55%) in March 2018 indicating they would not have difficulty employing staff over the next 3 months in March 2018.
Of the consultants surveyed, 67% believed fees would stay the same over the next 3 months (up from 66%), 7% expected them to increase (down from 15%) and 23% anticipated a decrease (up from 16% in December 2018).
Tender activity for Queensland Government building projects over $1 million averaged 4.1 tenderers per project in the March quarter 2019, decreasing from 4.3 in December quarter 2018. Looking at open tenders accepted in the March quarter 2019 (by value) compared to the December quarter 2018, the breakdown by project type was 84% for education-schools (down from 98%), 8% for hospitals/health/welfare (up from 1%), 4% for residential (up from 1%), 3% for authorities (up from nil) and 1% for administrative/offices (up from nil).
The Brisbane region accounted for the largest proportion of all open tenders (by value) in the March quarter 2019, with 62% (no change from the December quarter). This was followed by the Moreton South/Gold Coast (23% up from nil), Far North (6% up from 5%), Wide Bay Burnett (4% up from 2%), Central West (3% up from nil) and Fitzroy regions (2% down from 13%). No activity was recorded in the Moreton North/Sunshine Coast (down from 10%), Darling Downs (down from 4%), Mackay (down from 3%), North West (down from1%), South West and Northern regions (both nil in the previous quarter).
There was higher than average tender activity for projects within the education-schools sector and within the Wide Bay Burnett region during the March quarter 2019.
In March quarter 2019, the only building material monitored by HPW that recorded a cost increase from the previous quarter was face brick – clay (1.5%). No materials recorded a decrease during this period. According to the Cordell Building Cost Guide, between March quarter 2018 and March quarter 2019 the only building material to increase in cost was 200mm standard concrete block (4.0%). Materials that recorded the most significant decrease in cost over the 12 months were F8 pine 90mm x 35mm (5.1%), mild steel sections – beams (4.6%) and face brick – clay (3.2%).
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) for licensees.
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.
Informed by feedback from 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 commenced on 2 April 2019 and implemented 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 (PDF, 4.3MB).
- 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 7 a week and provides 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