5 February 2020
2020 will continue to be challenging for the building and construction industry, but there is a light at the end of the tunnel for an industry that is one of Queensland’s biggest employers and contributors to the economy.
2020 will continue to be challenging for the building and construction industry, but there is a light at the end of the tunnel for an industry that is one of Queensland’s biggest employers and contributors to the economy.
Master Builders Deputy CEO, Paul Bidwell, said statistics from 2019 paint a clear picture of the tough year that’s been, with the forecast for 2020 looking equally as tough, particularly as sweeping legislative reforms, some set for introduction into parliament today, continue to have an impact and contribute to rising costs.
“Building work completed during the year to September 2019 was down 9.2 per cent over the previous year, totalling $20 billion. Almost two thirds of this was residential building work (approximately $13 billion), with the remaining $7 billion commercial building work,” Mr Bidwell said.
“It’s not all doom and gloom – we did have some bright spots during the year with alterations and additions and government buildings up 10.9 per cent and 24.3 per cent respectively.
“While these are strong numbers, they only represent a small portion of the overall work and they can’t hide the fact that the majority of Queensland’s building industry, who work in new houses, units and private sector commercial buildings, is struggling.
“Across the state, housing starts were down 26 per cent on the previous 12 months, with 32,611 new dwellings commenced over the year to September 2019.”
Looking ahead, 2020 will continue to be challenging but signs of a turnaround are expected as the year ends, as pent-up demand begins to push through to projects on the ground.
“On the commercial front the news is good where in 2020 we’re forecasting an increase to commercial building – up 7.3% from the 2019 estimate to $7.8 billion, mostly on the back of government expenditure on public buildings,” Mr Bidwell said.
“The retail sector will continue to decline before strengthening in 2021, while the reverse is true of education buildings as the government’s new schools investment program comes to an end. Demand for industrial buildings is also expected to be strong, while demand for offices will bounce back in 2020.
“Beyond 2020, modest growth in commercial building work is anticipated, climbing to $8 billion in 2023.”
“In the residential sector we’re forecasting 31,000 dwelling commencements in 2020, down 6 per cent from the anticipated total of 33,000 dwellings for 2019 and a further blow to an industry which has been struggling with declining numbers for several years.
“This is because despite record low interest rates, loans to owner occupiers to build a new home and first home buyers are both down significantly. Tightening access to finance is affecting all parts of industry with restrictions on development finance, builders’ overdrafts and customer mortgages leaving no one unaffected.
“However, we expect that early into 2021 a recovery will be underway, which will strengthen into the foreseeable future. We’re forecasting 35,000 commencements in 2021, increasing to 40,000 by 2022. Over this time, we expect alterations and additions to continue their strong trajectory.
“Our hope for the future is underpinned by the Queensland economy, which according to the Queensland Government’s 2019-20 mid-year fiscal and economic review is forecast to grow at a healthy 2.5 per cent. Business investment is improving, although it continues to be held back by weak consumer spending. Jobs growth is underpinning demand, Queensland’s population continues to grow at a modest 1.7 per cent.”
Along with the falling pipeline of work, the industry has also been subjected to a wave of regulatory reform that by and large has had a massive negative impact, creating a high level of unrest amongst the industry in general.
“The revamped Minimum Financial Requirements that Queensland’s building businesses need to meet are causing grief for tens of thousands of licensees. It remains to be seen whether these businesses can comply with the new laws by the end of 2020 and what action the building regulator takes against those who can’t.”
In mid-2020 the Queensland Government intends to introduce the next phase of its controversial Building Industry Fairness legislation. While there are some positive changes, by and large it will be to the cost and detriment of many builders and trade contractors.
“All in all, it’s set to be a tough year for the industry.”
Regional snapshot
Looking across the state the pipeline of building work varies significantly.
Greater Brisbane continues to attract nearly all the state’s job growth helping to underpin long-term demand. In the short-term that demand will be held back by a lack of investment in both residential and non-residential construction.
The Gold Coast has taken a real hit to jobs, losing 18,000 over the past year. Despite this, there’s confidence within the region in both sectors, with many confident about the future. The Sunshine Coast and Toowoomba have both seen a downturn in work but this should begin to turn around later in 2020 with good underlying demand from job growth and major projects.
Wide Bay has been enjoying strong growth but this will moderate over the coming year. Mackay & Whitsunday and Central Queensland should both be a case of ‘steady as she goes’, albeit at a low level, with respectable job growth and investment coming to these regions.
In North Queensland the flood repair work is expected to last most of 2020, but there are few signs of new investment to replace this when it comes to an end. However, a couple of major mining projects which are under consideration could be a game changer should they get underway.
Far North Queensland will continue as the stand-out performer in the regions with both new jobs and investment heading north.
Major Sponsors
