Construction News Round-Up - February 2024

By Clea Boyd-Eedle, published 29 Feb 2024

Calls for structural reforms in Australia to stimulate housing construction after post-COVID slowdown

The number of new residential homes beginning construction nearly halved between mid-2021 and mid-2023, according to the Australian Bureau of Statistics. High interest rates, rising costs of existing homes, the cost of living crisis and increases in material costs have been identified as leading causes of this decline. Many contractors with previously busy pipelines are now finding work to be drying up as planned projects are being put on hold or cancelled due to material and labour shortages, as well as financing issues.

Construction leaders are calling upon the government to provide much higher grants for first home buyers and builders, to reform stamp duty and its imposition on foreign investors, faster land release, and for lending restrictions to be loosened to provide a pathway to home ownership for lower income first homebuyers.

Regions need specific new build targets; more dedicated funding for critical housing infrastructure: Regional Australia Institute

The National Regional Housing Summit, held in early February by Regional Australia Institute (RAI), highlighted a number of requirements to address growing challenges in regional Australian housing. Major issues discussed were the 50+ per cent increase in price in housing, a rental vacancy rate below 1.4 per cent, rising homelessness rates and a need for more diverse housing options.

One of the key findings from the Summit was the importance of collaboration between the community and developers & construction companies, to better understand the needs of Australians living in regional areas and provide residents’ input into future projects. Examples of success were shared, demonstrating that the application of creative strategies can and have resulted in positive outcomes for everyone involved.

NSW: Women in Construction Industry Innovation Program Year 2 grant applications now open

Grant funding applications has opened for a second round for the Women in Construction Industry Innovation Program in New South Wales. With construction still being one of the most male dominated industries in Australia, the NSW government has developed the Industry Innovation Program with the goal of increasing the number of women working in construction, progress and improve culture within construction workplaces for women, and ultimately empower women to take on leadership roles within construction companies.

The program provides women with educational opportunities, mentoring, work experience and training in established construction workplaces. It also includes flexible work practices and child-case support for parents and carers to pursue their careers in construction with barrier minimisation. Women who are interested in participating can apply for the grant here.

Master Builders Queensland warns of new price hikes for building materials from February

Master Builders Queensland has shared that building materials are expected to experience a wave of price increases this month within the state. The price of bathroom products are expected to increase by 4 to 7 per cent, and gyprock products up by a significant 9 to 12 per cent. Tools, home insulation, concrete panels, and fibre cement and cladding products are all also expected to have price increases between 3.5 and 6 per cent.

Supply chain shortages are no longer thought to be the cause of these price increases, with a shortage of labour attributed to the majority of material price increases. Construction Skills Queensland has estimated the need for an extra 18,000 construction workers in order to address the state’s housing crisis.

Subcontractors ensured payment protection in Western Australia

Subcontractors in WA will now be ensured much stronger protection over payment in cases of upstream insolvency, thanks to The final stage of the Building and Construction Industry (Security of Payment) Act 2021 coming into effect this month.

Protections for subcontractors in the act include, structured and transparent payment processes, more equitable contracting processes, rights to claiming regular payments, a structured dispute resolution pathway, a retention trust scheme, and more power over service providers who have a history of non-payment or relevant financial disputes.

St Hilliers’ construction business enters administration

Sydney-based construction company St Hilliers has entered administration, with work at 21 sites being put on pause by administrators awaiting operational assessments. St Hilliers’ real estate division was not affected.

Construction insolvency appointments accounted for 28% of all Australian insolvencies in the last six months, due to significant rises in material and labour costs. Banks are also hesitating to provide loans for large-scale projects, and imposing stricter terms and conditions, impacting many construction firms’ abilities to complete projects.

New classroom builds in New Zealand in doubt amid cost-cutting and reprioritisation

The New Zealand Education Ministry has paused the builds of more than 20 new schools and suggested further impact on another 80 new schools builds in a major cost-cutting move. Nearly 300 new classrooms to cater for 6,600 students were promised in the 2023 budget. Previous government expectations and inadequate communication have been blamed for the shortfall by Education Minister Erica Stanford.

Many school leaders with projects promised state a continued lack of communication with the new Education Minister and stress the dire need for improved facilities for students. Safety of students due to unsafe classroom environments are also a key worry for school leaders. Projects costs have skyrocketed in New Zealand, with major cost overruns severely impacting budget availability and ability to complete school builds.

New Zealand Government Battles Soaring Construction Costs

Building and Construction Minister Chris Penk has stated the government’s commitment to reduce construction costs and make building a home more affordable. The cost of building a home in New Zealand has increased by 41 per cent since 2019, according to Stats NZ, with building costs consistently higher than other comparable overseas countries.

The cost to build a standalone house in New Zealand is approximately 50 per cent more expensive than building the same home in Australia.

Minister Penk has committed to reforming the existing building consent process to fast track the consent process, allow for more substitute products, and define roles and responsibilities in the process more clearly.

United Kingdom Construction News

Construction output down in UK in Q4 2023, as recession is confirmed

Overall construction output declined 1.3% in Q4 of 2023, with new construction rates declining significantly at a rate of 5% QoQ. The decline is thought to be a result of tougher borrowing conditions and a re-prioritisation of improving existing building assets away from new builds. Current economic uncertainty and a greater scrutiny of budgets from contractors and developers is affecting vendors throughout the construction lifecycle, particularly subcontractors.

However, Russell Haworth, NBS and Glenigan’s CEO, suggests that the end is in sight. Glenigan’s latest Construction Forecast suggests gradual growth (+8%) throughout the industry in the second half of 2024. This prediction is based on analysis of existing and planned construction projects, with consumer spending and market confidence expected to rise significantly in the coming months.

UK Construction Industry Turns More Optimistic as Rates Ease

Market borrowing costs have spurred optimism amongst UK construction companies, with positive outlook for the industry at its highest since 2021. Despite a decline in output in January this year, declines were less severe than expected, according to the S&P Global Intelligence’s recent survey.

While borrowing rates are still the highest since 2008, rate reductions are expected later this year. Tim Moore, Economics Director at S&P Global, stated “the prospect of looser financial conditions and an improving economic backdrop meant that business activity expectations [have] strengthened.”

UK Opinion: It’s time to act on youth recruitment

Severe labour shortages have had considerable negative impact on the UK construction industry in the last few years, with completion times being drawn out, quality of output compromised, and costs overrunning considerably. Frederik Murphy-Jackson, founder of FMJ Plastering, states that a primary factor impacting construction labour availability in the UK is a sharp decline in interest from young people to work in trades due to a lack of education and awareness of programs.

Murphy-Jackson poses a strategy for boosting youth interest in trades and construction by boosting funding into apprenticeship programs, shifting societal perceptions of tradespeople and young people’s attitudes towards apprenticeships.