Building Industry Bulletin - Issue 60, September quarter 2019
Welcome to the Building Industry Bulletin
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 September 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 7.5% to $45.6 billion.
In 2019–20, Queensland construction activity is forecast to increase by 0.4% to $45.8 billion. This is due to declines of $956 million in residential building and $136 million in non-residential building, offset by an increase of $1.3 billion in the engineering construction sector. A further increase of 0.9% to $46.2 billion is forecast for 2020–21.
Queensland engineering construction activity (e.g. roads, water, sewerage and mines) decreased by 9.3% to $19.6 billion in 2018–19. Over the 2 years to 2020–21, activity is forecast to average $20.6 billion with no significant growth in the sector. Major projects that have moved to the construction phase include the Sunshine Coast Airport expansion, Capricorn Highway duplication from Rockhampton to Gracemere and the Whitsunday Coast Airport upgrade.
Total non-residential building activity (e.g. offices, shops and hotels) decreased by 15.3% to $6.8 billion in 2018–19. This is forecast to be followed by a decline in activity of $136 million (2.0%) 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 Springfield Central Sports Complex and the Central Queensland inland Port near Emerald moving into the construction phase, total non-residential building is forecast to increase by 1.6% in 2020–21, with activity reaching $6.7 billion.
In 2018–19, total residential building decreased by 2.5% to $19.2 billion. Over the 2 years to 2020–21 private renovation expenditure is forecast to have average annual growth of 13.8% reaching $7.9 billion, new dwelling construction expenditure is forecast to have an average annual decline of 7.8% to just under $11.0 billion and total residential dwelling construction (including public dwelling construction) is projected to have an average annual decline of 0.25% to $19.1 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 around 240,000. The estimated unemployment rate for the construction industry for September quarter 2019 was 4.1% compared to 6.3% for Queensland in September quarter 2019.
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 September 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 59% of capacity in September 2019, a continued decline since March 2019 (66%). In the last 3 months, 21% of all contractors reported their workload had increased, down from 27% in June 2019. There was increased optimism regarding the forward view of work and planning, with 39% of contractors believing their workload would increase over the 3 months to December 2019 (27% in June 2019).
Contractors’ beliefs about labour cost fluctuations were also more optimistic than in June 2019 with 62% of contractors in September 2019 indicating labour costs would stay the same in the next 3 months, while 32% believed they would increase during this period (compared to 49% and 42% in June respectively). The perception that building material costs would not rise continued, decreasing to 43% in September 2019, significantly lower than the high point of 71% in June 2018.
In September 2019, 14% of contractors reported difficulty employing subcontractors overall (no change from June 2019). In the same period, 29% of contractors reported having difficulty finding suitably experienced or qualified subcontractors, representing a slight increase from 26% in June 2019. Of those contractors experiencing difficulties employing subcontractors, 52% in September 2019 suggested this difficulty was across all trades (an increase from 48% in June 2019).
The most mentioned trades for those experiencing difficulty employing subcontractors were carpentry (55%), wall and floor tiling (39%) and plastering (36%). Among those respondents who had experienced subcontractor shortages, 'Increased project costs' and an ‘Influx of unskilled personnel’ 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 September 2019 with consultants indicating, on average, they were operating at 66% of capacity (no change from June quarter 2019). In the same period, 31% of consultants reported their workload had increased over the previous 3 months (an increase from 23% in June 2019). The projected change in workload continued to increase in September 2019 with 39% of consultants predicting their workload would increase over the next 3 months (34% in June quarter 2019). Difficulties in finding work in September 2019 (59%) remained consistent with the levels reported in June (62%) and March 2019 (57%).
In September 2019, 26% of consultants indicated they were seeking to increase their staff numbers (up from 20% in June 2019), while the majority (64%) reported they were seeking to maintain their current staff numbers (down from 74% in June 2019). The difficulty employing staff reported by consultants has remained consistent since December 2017 with almost half of all consultants (47%) in September 2019 indicating they would not have difficulty employing staff over the next 3 months (down from 52% in June 2019).
Of the consultants surveyed, 74% believed fees would stay the same over the next 3 months (up from 73%), 9% expected them to increase (down from 12%) and 16% anticipated a decrease (up from 12% in June 2019).
Tender activity for Queensland Government building projects over $1 million averaged 6.2 tenderers per project in the September quarter 2019, increasing from 4.9 in June quarter 2019. Looking at open tenders accepted in the September quarter 2019 (by value) compared to the June quarter 2019, the breakdown by project type was 44% for education-schools (up from 11%), 32% for recreation (up from 2%), 14% for hospitals/health/welfare (down from 16%), 8% for residential (down from 56%) and 2% for authorities (no change). No activity was recorded for the education-colleges (down from 10%) and administrative/offices (down from 3%) sectors.
The Brisbane region accounted for the largest proportion of all open tenders (by value) in the September quarter 2019 (73% up from 28%). This was followed by the Far North (17% down from 29%), Moreton South/Gold Coast (8% up from 2%) and the Darling Downs (2% down from 5%) regions. No activity was recorded in the Wide Bay Burnett (down from 28%), Fitzroy (down from 6%), Northern region (down from 2%), Central West, 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 residential and education-colleges sectors and within the Brisbane and Moreton South and Gold Coast regions during the September quarter 2019.
In September quarter 2019, the building materials monitored by DHPW that recorded the most significant cost increases from the previous quarter were F8 pine 90mm x 35mm (8.1%), aluminium fixed windows (6.8%), float glass tinted (6.0%) and 25mpa concrete (5.0%). No materials recorded a decrease during this period.
According to the Cordell Building Cost Guide, between September quarter 2018 and September quarter 2019, building materials that recorded the most significant increases in cost were 25mpa concrete (8.9%), aluminium fixed windows (8.6%), float glass tinted – 4mm thick (8.5%) and F8 pine 90mm x 35mm (8.1%). No materials recorded a decrease in cost over the 12 months.
Mechanical services – new licence
New mechanical services licensing laws commence on 1 January 2020. These laws will regulate mechanical services work including medical gas work in high risk buildings such as shopping centres, high-rise office buildings and health facilities.
Mechanical services work involves mechanical heating or cooling of commercial and residential buildings e.g. air conditioning, refrigeration and air handling systems and medical gas work.
The licensing requirements were developed to address the health and safety risks posed to people who work on and use these systems. If incorrectly installed or maintained these systems promote the growth of potentially fatal bacteria, such as legionella.
Extensive consultation has informed the licensing framework, including the release of a Consultation Regulatory Impact Statement (RIS) in June 2019. The RIS sought feedback about the technical details of the mechanical services licensing requirement and that feedback helped shape the framework. Details about the feedback received is summarised in the Decision RIS (PDF, 2.4MB).
The licensing details are prescribed in the Queensland Building and Construction Commission Regulation 2018 (QBCC Regulation), which includes the following 4 licence classes for contractor, nominee and site supervisors:
- Mechanical services – medical gas
- Mechanical services – air conditioning and refrigeration (unlimited design)
- Mechanical services – air conditioning and refrigeration (limited design)
- Mechanical services – plumbing.
And the following three occupational licence classes:
- Mechanical services – medical gas
- Mechanical services – air conditioning and refrigeration
- Mechanical services – plumbing.
The licences will be regulated by the Queensland Building and Construction Commission (QBCC).
From 1 January 2020 contractors, nominee supervisors and individuals completing an apprenticeship will need to obtain a mechanical services licence to be able to lawfully perform this work.
A 6-month moratorium period will give these businesses and individuals until 30 June 2020 to meet the licensing requirements or risk being fined. During this time, employees (including site supervisors) can continue performing mechanical services work while their employer’s application is being decided by the QBCC.
Employees (site supervisors and occupational tradespeople) who work for a licensed contractor will have until 1 January 2022 to meet the licensing requirements. However, if they do not hold a licence from 1 January 2022, they risk being fined.
The transitional provisions will recognise the expertise of individuals already performing mechanical services work, while giving consumers confidence that people performing this work have the necessary training and skills.
For more information on the mechanical services licensing framework, please visit the QBCC webpage.
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 September quarter 2019, the MCC met in Townsville on 3 September 2019.
Items considered and discussed at the meeting included building confidence, fire protection, continuing professional development and the National Construction Code.
To access MCC Communiques, please visit the Communiques of minister meetings page.
- Last reviewed: 20 Dec 2019
- Last updated: 20 Dec 2019
I want to...
- The impact of Indigenous Procurement - Panel discussion 14/07/2020
- Payroll tax annual return 2020 15/07/2020