Australian Construction Industry Conditions Set to Improve

The entire Australian construction market as of 2022 was valued at close to USD 400 billion and the market is expected to grow at a compounded annual growth rate of approximately 5 %  (CAGR) for the forecasted period. Among the drivers that are pushing the industry forward currently is attributed to large investments flowing into the industry from both domestic and foreign sources.

Another factor that has had a positive impact on the industry includes the latest technological innovations revolving around prefabricated buildings that are also a relevant if not significant driver for the industry. Other factors include government subsidies and the rise of enterprises that offer heavy machines such as skid steer and excavator hire that allow construction industries to accept projects with lower capital in hand.

According to market reports investments remain positive as projects related to both residential and commercial projects are already in the pipeline for the next few years and these projects are expected to provide the industry with enough construction related activity to sustain a positive momentum over the next two to three years.

Long term projects such as the STH BANK project by Beulah International is expected to keep the Victorian state’s construction busy for at least another five years. The project that will introduce the tallest building in Australia is worth 2bn dollars and will effectively provide employment for an approximate 4700 Australians.

On the downside, the latest data retrieved from the Bank’s liaison scheme clearly indicate that capacity or capability constraints have started to establish in specific sectors, and these constraints are expected to impede the growth pace of the industry for certain durations.

The data reveals that privately sanctioned non-residential projects that have yet to be completed have increased which reflect that there are more commercial projects in the pipeline than contractors are able to manage or handle.

On the other hand the outlook residential investments have been lowered based on demand for new detached residences which is not only low currently, but will also decline in the near future due to rising prices attributed to higher construction costs that dampen the incentive to invest in new dwellings.

On a positive note, high-density residential projects (apartments and condominiums) have become an attraction for developers as rental rates in places such as Sydney and Melbourne are lower currently and this coupled with the fact that Australians are recovering from the pandemic and business and employment are almost at pre pandemic norms – things are looking brighter for the industry within this sphere.

Mordor Intelligence reported that the Australian construction related industry from all components is responsible for 9% of Australian GDP valued at more than 360bn dollars and is projected to grow by more than 2 % annually. The industry currently employs an approximate 1.1 million individuals which basically means that one in every 10 workers in Australia is associated with the construction industry constituting of nearly 9 % of the entire Australian workforce.

This indicated an increase based on the industry’s statistics since 2018 as employment for construction increased by more than 7 %. Current projections indicate that by 2025 total employment will increase to almost 1.3 million. This is in fact a component of the Australian government’s initiative to revive the economy via a strong vision related to developing ‘smart properties’ that are driven by some of the latest cutting-edge technological solutions.

A big component of the Australian government’s economic strategy is centred on digital transformations which among all the industries, the construction industry has been the slowest to adapt. Exception to this fact are the heavy machines that the construction industry depends on as the latest machines have A.I systems, automated and are able to perform a series of different task by using a single machine such as a skid steer obtained on hire.

Most construction companies prefer to machine such as skid steer in order to maintain healthier cash flows and maintain capital structures. Start-ups according to market reports are playing leading roles in relation to the digitisation of the construction industry which has also attracted both foreign and domestic investors who have become exceedingly interested in various possibilities that these start-ups have to offer.

Currently the projects at hand are slowly altering Australian skylines and the speed and progress that these latest construction projects are in a variety of ways attributed to prefabricated construction components. These components are being manufactured off-site and transported to project sites where they are assembled rapidly using heavy machines such cranes which is significantly quicker and cheaper than conventional bricklaying approaches.

Prefabrication in essence is similar to obtaining heavy machines such as renting skid steers and other construction machines which lower cost as the advantages of prefabrication includes significantly lower labour costs without the compromising quality. Prefabricated structures are generally built off-site in environments that are stringently regulated. Such strategies are positive development in the industry as prefabrication and renting construction equipment ultimately lead to lower excavator hire prices, lower mortgages, increase of homeowners, and even lower rents.

The construction industry of Australia is segmented generally into residential, commercial, industrial, infrastructure, energy and utilities with both energy and utility related projects deemed as a subset of the infrastructure category. Each sector is a significant contributor to the entire Australian economy in terms of not just attracting investments into the country, but also in terms of employment levels and lower property development costs.

The latest developments within the industry have been positive despite shortcomings that stem from the supply chain which is still riddled with numerous issues owed to the recent pandemic.

In essence based on the current industry conditions and dynamics, the construction industry has undergone a tremendous transformation due to elements associated with prefabrication, technologies that allow heavy machines to perform multiple tasks, the support provided by construction equipment rental enterprises and government initiatives that are more than eager to revive the sector to pre pandemic status as soon as possible.

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