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The outlook for property and construction in Queensland is a mixed bag but is generally positive as an anticipated home building recovery is expected to boost employment and compensate for a weaker commercial building sector and a peak in resource construction activity.
Industry confidence is growing. Though 51 per cent of respondents to a recent Master Builders survey expect no change in conditions this year, builders who anticipate a more favourable operating environment outnumber those expecting a less favourable one by almost two to one, albeit with participants in the most recent Property Council of Australia Property Industry Confidence Survey being muted in their expectations, reflecting more subdued industry sentiment outside of the housing sector.
Below is an analysis of the outlook for the state in terms of residential building, commercial property, non-residential building, engineering construction and construction industry employment.
For now, conditions in the market for new residential construction are woeful. At 27,040, the Housing Industry Association’s (HIA) latest forecast for the overall number of dwelling units commenced throughout Queensland in 2012 was slightly up from 2011 but remains at decade lows.
Going forward, however, Master Builders (Queensland) expects conditions to improve as a combination of low interest rates and unemployment, decent population growth and the launch later this month of the Great Start Grant (formerly the First Home Owners Construction Grant) and its associated media campaign feed through into higher levels of demand.
The HIA agrees, tipping a modest increase in starts to 28,130 this year before a stronger rise next year and with activity returning to more respectable levels of activity by historic standards in 2015.
Unfortunately, such is not the case in renovations, whereby new work is coming in only slowly. At $556.5 million (ABS), the value of investment in residential alterations and additions approved in the six months to January was well down on the previous corresponding values of $678.6 million and $656.1 million, respectively.
The anticipated rise in demand is also good for house prices, albeit with prices having ticked up by a modest 0.7 per cent during the December quarter having been flat before that and with participants in the Property Council survey anticipating only modest rises in 2013.
Thanks to the subdued nature of the non-resource economy, the outlook for commercial property across most sectors in Queensland is not strong, with participants in the Property Council survey expecting only one sector (retirement living) to experience any form of decent growth in capital values over the next twelve months.
Office vacancy rates in Brisbane’s CBD rose from eight per cent in July last year to 9.1 per cent in January according to the Property Council’s latest Office Market Report, as demand plummeted to four-year lows. Negative demand in the city’s fringe, meanwhile pushed vacancies from 8.4 per cent to 9.6 per cent while vacancy rates on the Gold Coast and Sunshine Coast are a whopping 20.3 per cent and 14.1 per cent, respectively.
The only bright indicator from a capital value point of view is that the volume of stock set to come onto the market over the medium term is limited, meaning that only low levels of demand will be needed in order to absorb new office space which comes along.
Thanks to reasonable volumes of work in office building and a couple of significant dollar value projects in health care, overall dollar values of activity in non-residential building are holding up at respectable levels for now.
Going forward, however, with a limited volume of new projects on the horizon, the Australian Construction Industry Forum (ACIF) expects subdued activity levels across virtually all sectors.
Having experienced extremely strong volumes of work in mining and resource projects over recent years, activity in Queensland’s engineering construction sector is set to fall back but remain at reasonably high levels for some time.
Outside of mining, output in most sectors will remain steady, ACIF says, with telecommunications being the area of greatest promise thanks to work on the NBN.
At the moment, employment levels in the Queensland construction industry are reasonably high, with the overall number of people employed throughout the state on a full time basis in the three months to November last year (210,500) being well up on the estimate for the previous corresponding period in 2011 (201,600), according to ABS figures.
Residential sector conditions, however, are weak. The latest HIA Trades Report showed that both Brisbane and regional Queensland had a significant oversupply of housing construction tradespeople in the December quarter.
Going forward, while participants in the Property Council survey expect negative growth in staffing levels over the next 12 months – a reflection of the subdued conditions in commercial building referred to above, the anticipated recovery in home building activity is expected to lift overall employment levels. From an expected number of 258,000 in 2012-13 (full and part-time employees included), the ACIF expects the sector’s workforce to expand to 285,000 by 2014-15 as the housing construction recovery fully kicks in.