Building Industry Bulletin - Issue 59, June quarter 2019
Welcome to the Building Industry Bulletin
This quarterly Building Industry Bulletin provides updates on the latest trends within the Queensland building industry as relevant to the Department of Housing and Public Works (DHPW).
In this issue
The Department of Housing and Public Works (DHPW) 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 June quarter 2019 economic update from NIEIR shows that in 2018–19, Queensland construction activity [or total work done across the residential building (houses and units), non-residential building and engineering construction sectors] decreased by 3.8% to $46.1 billion.
In 2019–20, Queensland construction activity is forecast to decline by 2.9% to $44.8 billion. This is due to declines of $2.2 billion in residential building and $312 million in non-residential building, offset by an increase of $1.2 billion in the engineering construction sector. Activity is forecast to stabilise in 2020–21, declining marginally by 0.2% to $44.7 billion.
Queensland engineering construction activity (e.g. roads, water, sewerage and mines) decreased by 6.2% to $20.3 billion in 2018–19. Over the 2 years to 2020–21, activity is forecast to average $20 billion with no significant growth in the sector. Major projects that have moved to the construction phase include the Dalby to Miles pavement widening and safety upgrade and the Oakey 2 Solar Farm.
Total non-residential building activity (e.g. offices, shops and hotels) decreased by 13.3% to $6.9 billion in 2018–19. This is forecast to be followed by a decline in activity of $31 million (4.5%) to $6.6 billion in 2019–20 due to a fall in private non-residential building approvals in 2016–17 and 2017–18. With new projects including Foxwell State Secondary College at Coomera and Rydges hotel development at the Gold Coast Airport moving into the construction phase, total non-residential building is forecast to increase by 1.9% in 2020–21, with activity reaching $6.7 billion.
In 2018–19, total residential building increased by 3.0% to $18.9 billion. Over the 2 years to 2020–21 private renovation expenditure is forecast to have average annual growth of 12.4% reaching $7.6 billion, new dwelling construction expenditure is forecast to have an average annual decline of 10.7% to $10.1 billion and total residential dwelling construction (including public dwelling construction) is projected to have an average annual decline of 2.4% to $17.8 billion.
The total 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) in 2018–19 reached almost 240,000. The estimated unemployment rate for the construction industry for June quarter 2019 was 4.1% compared to 6.3% for Queensland in June quarter 2019.
To help understand the state of the building and construction industry cycle in Queensland, DHPW conducts quarterly research surveys with contractors and consultants registered with the department's prequalification (PQC) system. In the June 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 62% of capacity in June 2019, a slight decrease from March 2019 (66%). In the last 3 months, 27% of all contractors reported their workload had increased, up from 23% in March 2019. There was a significant decline in optimism regarding the forward view of work and planning, with 27% (the lowest level reported since March 2015) of contractors believing their workload would increase over the next 3 months to September 2019 (46% in March 2019).
Consistent with March 2019, 42% of contractors in June 2019 believed labour costs would increase in the next 3 months, while 49% believed they would stay the same during this period (40% and 55% in March respectively). The perception that building material costs would rise, decreased to 52% in June 2019, significantly lower than the high point of 71% in June 2018.
In June 2019, 14% of contractors reported difficulty employing subcontractors overall (down from 18% in March 2019). In the same period, 26% 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, 52% in June 2019 suggested this difficulty was concentrated across 1–2 specific trades (slight decline from 58% in March 2019).
The most mentioned trades for those experiencing difficulty employing subcontractors were carpentry (55%), wall and floor tiling (42%) and plastering (39%). Among those respondents who had experienced subcontractor shortages, 'Increased project costs' and the 'Inability to accept projects' have both significantly impacted those contractors having difficulty employing subcontractors.
On average, contractors estimated that 40% of their workload over the previous 3 months was on behalf of local, state or federal government.
Workload remained stable in June 2019 with consultants indicating, on average, they were operating at 66% of capacity (down from 67% in March 2019). In the same period, 23% of consultants reported their workload had increased over the previous 3 months (consistent with 25% in March 2019). The projected change in workload increased slightly in June 2019 with 34% of consultants indicating their workload would increase over the next 3 months (30% in March 2019).
Difficulty in finding work continued to increase in June 2019. More than half of all consultants (62%) reported they were experiencing difficulties finding work, up from 57% in March 2019 and 47% in December 2018).
In June 2019, 20% of consultants indicated they were seeking to increase their staff numbers (down from 24% in March 2019), while the majority (74%) reported they were seeking to maintain their current staff numbers (up from 65% in March 2019). The difficulty employing staff reported by consultants has remained consistent since September 2018 with more than half of all consultants (52%) in June 2019 indicating they would not have difficulty employing staff over the next 3 months.
Of the consultants surveyed, 73% believed fees would stay the same over the next 3 months (up from 67%), 12% expected them to increase (up from 7%) and 12% anticipated a decrease (down from 23% in March 2019).
Tender activity for Queensland Government building projects over $1 million averaged 4.9 tenderers per project in the June quarter 2019, increasing from 4.1 in March quarter 2019. Looking at open tenders accepted in the June quarter 2019 (by value) compared to the March quarter 2019, the breakdown by project type was 56% for residential (up from 4%), 16% for hospitals/health/welfare (up from 8%), 11% for education-schools (down from 84%), 10% for education-colleges (up from nil), 3% for administrative/offices (up from 1%), 2% for authorities (down from 3%) and 2% for recreational projects (up from nil).
The regions that accounted for the largest proportion of all open tenders (by value) in the June quarter 2019, were the Far North (29% up from 6%), Brisbane (28% down from 62%) and Wide Bay Burnett (28% up from 4%). This was followed by the Fitzroy (6% up from 2%), Darling Downs (5% up from nil), Moreton South/Gold Coast (2% down from 23%) and the Northern region (2% up from nil). No activity was recorded in the Central West (down from 3%), Moreton North/Sunshine Coast, Mackay, North West and South West (all nil in the previous quarter).
There was higher than average tender activity for projects within the education-colleges sector and within the Darling Downs region during the June quarter 2019.
In June quarter 2019, the only building material monitored by DHPW that recorded a cost increase from the previous quarter was face brick – clay (1.1%). No materials recorded a decrease during this period. According to the Cordell Building Cost Guide, between June quarter 2018 and June quarter 2019, building materials that recorded the most significant increase in cost were 25mpa concrete (5.7%), F8 pine 90mm x 35mm (5.3%), reinforcing steel mesh (4.8%) and face brick – clay (4.4%). The only material that recorded a decrease in cost over the 12 months was 200mm standard concrete block (3.9%).
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.
During the June quarter 2019, the MCC met in Brisbane on 8 May and 18 June 2019.
Items considered and discussed at the 8 May 2019 meeting included:
- current issues impacting the availability and cost of Professional Indemnity (PI) Insurance for building industry professionals
- update on the implementation of the new Minimum Financial Requirements (MFR) regulation
- update on the progress of the Queensland Government's Safer Buildings Program.
An Extraordinary MCC meeting took place on 18 June 2019 to continue to discuss the challenge of PI insurance for building industry professionals.
To access MCC Communiques, please visit the Communiques of minister meetings page.
Architects and Professional Engineering Regulations
The architectural and engineering professions play a vital role in upholding the safety of Queensland’s buildings.
The Architects Regulation 2019 and the Professional Engineering Regulation 2019 (the Regulations) commenced on 8 July 2019 and introduced a number of amendments. The Regulations introduce a penalty infringement notice (PINs) offence regime to be administered by the Board of Architects of Queensland and the Board of Professional Engineers of Queensland for certain offences already prescribed in the Architects Act 2002 and the Professional Engineers Act 2002.
PINs commence on 1 January 2020 and provide benefits to the Boards, the professions and consumers as the Boards are able to issue PINs for lower level offences rather than through court proceedings which are costly to both the Boards and the alleged offender.
The Architects Regulation 2019 also prescribes additional titles, names and words to clarify that only registered architects may use these titles or terms in claiming to be an architect or providing architectural services. The Architects Act 2002 already protects the terms 'architect', 'registered architect', 'architectural services', 'architectural design services' and 'architectural design'. These additional protected terms will clarify the context in which these terms can be used and ensure variations on these terms are also protected.
Protecting more architectural terms benefits consumers by clarifying the context in which the terms can be used.
New BPEQ website now live
The Board of Professional Engineers of Queensland (BPEQ) has re-launched its website with a fresh new design and has updated the information regarding recent board appointments.
The BPEQ website is available at: https://www.bpeq.qld.gov.au/.
Queensland plumbing law reform information sessions
Information sessions on the Queensland plumbing law reforms took place throughout Queensland during May and June.
These reforms deliver on commitments made in the Queensland Building Plan (QBP) to make the construction industry safer, fairer and more sustainable.
The sessions covered:
- the introduction of a new Act, a new regulation and a revised Queensland Plumbing and Wastewater Code
- an update of the new Plumbing Code of Australia 2019
- an update on the implementation of the QBP
- the new plumbing laws that include a number of new regulatory reduction and compliance initiatives, including:
- a new permit application system allowing for work to commence up to 18 days earlier for the majority of new homes
- a new appeal rights at the inspection stage of plumbing work allowing licensees to appeal an action notice earlier than currently permitted
- an extension of time for an existing permit allowing licensees to amend rather than start a new application as is current practice; and
- a stronger penalty framework providing a greater deterrent for those who breach the plumbing laws, particularly for those individuals who are not appropriately licensed or for licensees who direct or supervise unlicensed work.
Sessions were well attended by licensees and contractors, local government and water service providers.
If you were unable to attend a session or want to know more about it, please visit the webinar online.
Mechanical Services licensing
The Queensland Building Plan aims to create a safer, fairer, more sustainable building and construction industry by reforming ten key areas, including licensing.
The new mechanical services licence recognises the specialist streams that comprise this type of work:
- Mechanical services – medical gas
- Mechanical services – air-conditioning and refrigeration
- Mechanical services – plumbing.
The purpose of the licence is to address the dangers posed by incorrectly installing and maintaining mechanical services and medical gas systems, such as legionella in commercial air-conditioning systems like those found in hospitals, aged care facilities and shopping centres. The mechanical services licence will enhance industry skills and improve the health and safety of Queenslanders.
The mechanical services licensing framework will be regulated under the Queensland Building and Construction Commission Act 1991 (QBCC Act) and the QBCC Regulation. The licensing provisions will commence after government considers the outcome of public consultation.
While the QBCC Act has established the licensing framework, the QBCC Regulation will prescribe the technical detail such as licence classes, scopes of work and eligibility requirements.
The Department of Housing and Public Works consulted (through a Regulatory Impact Statement and an online survey) about the technical details to be included in the QBCC Regulation.
The consultation period closed on 5 July 2019.
- Last reviewed: 30 Sep 2019
- Last updated: 13 Nov 2019