Construction Climate – Australia and NZ

In its Construction Cost Commentary for January 2007, the Rider Hunt offices report tendering activity continues to surge in most Australian cities, Sydney being the only location bucking the trend. In New Zealand, sustained levels of Building Consents and the coming on-line of some major projects indicate continued high levels of activity in 2007.

What I’ve done is to bring you some extracts from that report, And you’ll notice that Brisbane, Perth and Darwin are currently the strongest markets.


|_{width:50%}. Adelaide |_. Brisbane |
|^. The Adelaide market remains steady. Skills shortages are less of an issue than in the last few years. The stability however will be affected by the upcoming public sector works and the start of Olympic Dam in the private sector. The forecast is for the market to remain stable short term, but in the medium term, early 2008, expect more significant tender price movements due to a confluence of new work. |^. Queensland is still experiencing a steady increase in construction costs due to the continuation of the resources boom, the increase in commercial activity in Brisbane and the impact of Government spending on infrastructure. Skill shortages still remain a major problem, with resource shortages apparent in both Professional Services and on-site labour, across all sectors. |
|_. Canberra |_. Darwin |
|^. There is currently a large volume of work in Canberra in the office market, driven by demand for new space for Government departments. Many of the projects are well advanced, with structural and finishing trades very busy, maintaining pressure on local resources. The relocation of Government departments to new buildings is anticipated to create a second wave of activity as existing buildings undergo refurbishment in order to attract new tenants. |^. The market is still exhibiting strong growth with demand outstripping supply in all sectors and in particular the residential market. Continuing strength and optimism in the economy is underpinning building activity, resulting in continuing upward pressure on building rates and prices. This upward pressure is further exacerbated by a shortage of skilled labour. |

Analysis of data from Rider Hunt’s offices in Australia and New Zealand reveals the following expectations for market sector performance for the next six months.

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|_{width:50%;}. Melbourne |_. Perth |
|^. The window of tendering opportunity which existed within the Melbourne market at the last Cost Commentary has now closed. The resultant increase in the volume of work in the marketplace has inevitably impacted upon the sub-contract market. In the coming year, continued pressure from rising volumes of work will see the market show more significant price rises than in recent times, as rising sub-contract structure prices feed through and are followed by increases in services and finishes trades. |^. Cost increases continue in the Perth market, with main contractors and sub-contractors becoming more selective in tendering for projects, as firms reach their capacity for future work. The State Government has announced that it will temporarily defer a portion of its capital works program to reduce the pressure on the industry and provide a measure of protection against any future downturn in workload from the private sector. However, there is little evidence of any reduction in work volumes in the short term. |
|_\2. Sydney |
|\2. The Sydney market is in a state of uncertainty. The pending March 2007 State election is likely to continue this uncertainty in the first part of 2007. Structural trade prices have eased from their previous highs. The impact of limited resources and materials price rises however, have increased the cost of building services trades. The next six months is likely to result in competitive market prices, which may be partially offset by materials price rises. |


|_{width:50%;}. Auckland |_. Christchurch |
|^. General levels of economic activity remain relatively high, despite high interest rates and general price inflation exceeding the Reserve Bank’s target. Volumes of construction work have eased in the last six months with resultant competitive pricing from sub-contractors and medium-sized contractors. |^. The Christchurch market remains stable, with a reasonable level of competition in evidence. However, certain key materials do exhibit considerable cost escalation. The forecast is for continuing steady price growth, with more competition in the coming year. |
|_\2. Wellington |
|\2. The Wellington commercial building sector remains buoyant, fuelled by the continuing demand for Government departments to relocate into new and fully refurbished existing buildings, as their leases expire. This, coupled with steady demand in the retail and industrial sectors, equates to high levels of commercial construction, with pressure on resources.|

Hopefully, this gives you a quick overview of the existing climate for Construction costs throughout the region.

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