Home > BIS Sharpnel forecasts Moderate Recovery in Building Commencements in 2011/12

BIS Sharpnel forecasts Moderate Recovery in Building Commencements in 2011/12

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BIS Sharpnel, industry analyst and economic forecaster company, is forecasting the national building commencements to show only a moderate recovery of 8% in 2011/12, which was a result from an estimated 12% decline 2010/11. According to the Building in Australia 2011 report, the decline from 2010/11 has been almost due to the winding down of construction related to the “Building Education Revolution” program.  This decline has caused an offset in the emerging recovery of commercial and industrial buildings.  However, it is the recovery of commercial and industrial buildings that would help establish the growth expected to occur in 2011/12.

“The continuing recovery in commercial and industrial building – up 21 per cent – will be a key driver of the improvement in building commencements in 2011/12, while increased construction in the health sector – up 73 per cent – will also play a part,” says BIS Shrapnel Managing Director, Robert Mellor.

“With the Australian economy largely recovering since the GFC, the environment has become more conducive for commercial and industrial development. There is also $7 billion in new hospitals and other health care facilities due to commence in 2011/12, particularly in Victoria, Queensland, South Australia and Western Australia.”

According to Mellor, the contribution from residential building is forecast to be minimal in 2011/12, which was due to the negative result in 2010/11 after the decline in activity from the First Owner’s Grant Boot Scheme and the Federal Government Public Housing Stimulus.  However, there has been a healthy rise in multi-unit residential starts, which are due to the improved financial environment that allows developers to be increasingly able to fund apartment projects.

After the quiet period of 2010/11, economic growth is predicted to strengthen through 2011/12, which would result in strong rises in resource investment and higher net overseas migration to increase labour requirements.  It is expected there would be a rise in residential demand, which would possibly increase by 10% over 2012/13.  However, the residential building upturn will be short lived due to resource sector ramps up, drive wage cost inflation and the increase of interest rates through to 2013.  The downtown in residential construction will result in a substantial underlying deficiency of dwellings emerging across most states.

“The gains are expected to be roughly felt equally across new houses and multi unit dwellings, with the upturn concentrated in Queensland, Western Australia and New South Wales.” says Mellor.

“These states will experience a rapidly rising dwelling deficiency, while affordability has also improved after solid income growth and weak price rises in recent years. In the other states, recent high levels of residential construction has meant that underlying demand and supply is more balanced and there is little upside.”

BIS Sharnpel forecasts there will be a 73% increase in health spending on new hospitals and hospital expansions at the start of 2011/12, which would then result in a 10% decline in non-residential buildings in 2012/13 as well as a 7% rise in commercial and industrial buildings.  Non-residential building activity is then forecast to remain relatively stable through to 2015/16.

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