Construction Activity Plummets, Expected to Recover

Queensland State Analysis NovemberWith construction starts at nine month lows and building approvals at their lowest point since March 2005, construction activity in Queensland has hit a low point.

But with expectations of a pickup over coming months, such a fall may be short-lived.

After strong activity throughout the middle of the year, the overall value of construction starts in Queensland has now fallen for four consecutive months, according to construction information service provider BCI Australia (see chart below). At $839 million, the value of starts in October was at its lowest point since January, and has fallen by more than half when compared with its peak in June of $1.836 billion.

Building approval figures are no more encouraging. At $971.4 million, the seasonally adjusted value of all buildings approved in the state during September stood at its lowest level since March 2005, according to the latest data from the Australian Bureau of Statistics (ABS).

In a broader context, these figures are not quite as bad as they seem:  on a quarterly basis, seasonally adjusted approvals were down 1.15% in September – hardly encouraging, but a less dire picture than that painted by the September monthly figures alone. Still, taken together, approval and construction start data clearly show that new work is coming in much slower now when compared with the middle of the year.

But there is light at the end of the tunnel. Thanks to an anticipated surge in residential starts, the overall value of construction starts in the state will bounce back to $1.637 billion by January.

After a strong September quarter, residential building conditions have fallen back. At $491 million, the expected value of residential starts in the December quarter will be down 62.4% on the September quarter ($1.307 billion) and 31.5% on the December quarter last year ($717 million), according to BCI. Residential building approvals in the three months to September ($1.994 billion) edged back slightly when compared with the June quarter ($2.004 billion).

Still, there are promising signs. With a few projects set to get going soon (see below) BCI expects starts to surge to $679 million in January – far higher than at any other time this year. In a positive sign, Queensland was the only state in Australia to record an increase in sales of new detached homes (5.7%) during September.

More broadly, thanks to high levels of investment, the state’s economy is doing reasonably well. Investment in equipment throughout the state is currently above long term averages by 38%, according to the latest State of the States report from Commonwealth Securities. But along with housing (see above), the state’s persistently subdued labour market remains a key area of weakness. At 5.7% in October (up from 5.4% in September), the state’s unemployment rate is a long way above the national average of 5.2%.

Rio Tinto South Embley Bauxite Project

Key Moving Sectors

With a good range of projects on the go, activity in the mining and transport sectors is chugging along.

Mining

Following the approval of the Australia Pacific LNG Project earlier this year, and with a good number of projects in the immediate term pipeline, the mining sector is running hot.

Key upcoming projects:

  • Rio Tinto South Embley Bauxite Project
  • Galilee Basin Mining Projects (2)
  • Rocklands Copper Project
  • Strata Coal Oaky Creek Expansion Project
  • Caval Ridge Mine Project
  • Moranbah North Coal Expansion Project

Transport

With four key projects having recently been deemed ‘significant’ by the Queensland government (see below), there is plenty of activity in transport construction.

Key upcoming projects:

  • Sunshine Coast Airport Expansion ( recently deemed ‘significant’)
  • Goonyella Rail expansion  (recently deemed ‘significant’)
  • Fitzroy Terminal (recently deemed ‘significant’)
  • Dungeon Point Coal Terminal (DPCT) (recently deemed ‘significant’)
  • Townsville Inner Harbour Expansion
  • Townsville Ring Road section 4 (design & planning stage)
  • Abbott Point Coal Terminal
  • Warrego Highway Upgrade Project
  • Moreton Bay Rail Link

Residential

Despite current weakness, as mentioned above, BCI expects a surge in residential construction starts in January.

Key upcoming projects:

  • Ella Bay Development (mixed use)
  • Waters Edge Residential Development Precincts 2 & 3 Mixed Development
  • Park Lane Mixed Use Development
  • Brighton On Broadwater Mixed Development Stage A1 – Coral
Queensland Construction Chart

Chart provided by: BCI Australia

 

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