Construction Recovery Needs Private Capital to Replace Pump Priming
6/3/2009
More than 75,000 construction jobs
could be lost due to a sharp fall in building activity, according to the latest
forecasts from the Australian Construction Industry Forum’s Construction
Forecasting Council (CFC).
Despite a swift upturn in
residential building and the federal government’s spending boost, construction
industry cash flow is forecast to contract by almost $20 billion over the next
two years.
“Spending on residential building is
forecast to turn around in 2009/2010, following a four per cent fall in the
2008/2009 financial year”, said CFC Chair Peter Verwer.
“The first home owners grant and
government stimulus packages have halted the recent decline in residential
building expenditure.”
“The CFC predicts a very strong
recovery in stand alone housing and in the alterations and additions market,
driven by pent-up demand and net population growth.”
“Apartment building is more likely
to remain in the doldrums until 2011/2012, with a 16% fall in spending
forecast.”
The CFC says the outlook for
commercial building – offices, shopping centres, hotel and industrial
facilities – is grim.
“Private spending on commercial
property is not forecast to recover for three years.”
“2011/2012 will see a sharp
improvement in private and commercial property spending following a contraction
of nearly 40% on current construction expenditure”.
“However, the overall picture for
new residential building is likely to be offset by a boost to government
investment in schools and hospitals.”
The CFC forecasts a sharp decline of
22 per cent in infrastructure spending in 2010/2011, following a one per cent
contraction during 2009/2010.
Infrastructure spending is due for a
cyclical downturn following unprecedented levels of activity, particularly
mining-related construction, which is expected to fall by 60 per cent.
“Mining-related construction
spending is quite solid for the next 12 months, however, weakening commodity
prices are expected to result in the postponement of very large projects and a
sharp drop in construction activity in 2010/2011.”
The CFC forecasts are prepared by
KPMG and Econtech.They assume a 1.2
percent fall in GDP over the next 12 months and an increase in unemployment levels
to 7.1 per cent.
“The economic downturn has dampened
demand, however, the market fundamentals are quite different from the recession
of the early 90s.”
“There is little evidence of the
sort of supply/demand imbalance that delayed the recovery of construction
spending following the last recession.”
“Indeed demand for residential
property is strong and spending on commercial buildings is slightly below the
historical average.”
“The flow of new capital will
directly determine the shape of the construction industry recovery.”
“Which means debt markets will need
to recover quickly if job losses are to be contained, given the Government’s limited
capacity to continue with pump priming programs.”
Contact:
Peter
Verwer, Chief Executive, Property Council of Australia
