Australia and New Zealand

Transcription

1 Strategy Management Consultancy Australia and New Zealand Regional Analysis knowledge center September update 2018

2 Contents Australia Australia Market Review 3 Macro indicators 4 Australia key statistics * 4 Value of construction output public/private * 4 Currency exchange rates * 5 Linesight average Australian construction costs Indices 7 Building cost index by capital city 7 Building cost index and consumer price comparison 7 Main Contractors 8 List of tier 1, 2 & 3 contractors 8 Housing 9 Dwelling unit approvals * 9 New Zealand New Zealand market review 10 Macro indicators 11 Value of construction output 11 Employment in construction * 11 New Zealand key statistics * 12 Currency exchange rates * 12 Linesight average New Zealand construction costs Housing 14 Residential work by area 14 Dwelling unit commencements * 14 * UPDATED SEPTEMBER 2018 Contributors: John Carleton, Rémi Chalon and Albena Spasova Linesight Australia and New Zealand

3 Australia Market Review Declines in general building and residential have been offset by gains in non-residential and engineering, up 5.7% and 4.9% respectively. Overall, construction activity increased by approximately 2% in the third quarter when compared to the same quarter of the previous year. Declines in general building (down 0.3%) and residential (down 3.2%) have been offset by gains in nonresidential (up 5.7%) and in engineering (up 4.9%). The above trend is forecast to continue through 2018 and into 2019, as the housing boom is already being referred to in the past tense. The housing market s landing has been relatively soft to date; however, its resilience will only be truly tested over the course of the next 12 months. As supply gradually catches up with demand (especially in the multi-unit Residential sector), Government-imposed restrictions on overseas investment will begin to impact on developers presales. Should the much talked about and continuously deferred RBA interest rate hike be implemented in the second half of this year as now predicted, 2018 could well be the perfect storm for the Australian economy s one-time star performer. Further Government intervention in the form of major urban transport infrastructure projects (rail and road) will see the Engineering sector continue to grow in the short to medium term. However, the latest boom in the Australian construction market brings its own difficulties. Companies are stretched to keep up with soaring demand for skilled workers and raw materials such as concrete, steel and asphalt. Historically, bottlenecks caused by varying demand across sectors have been alleviated by contractors diversifying and refocusing their attention, and workers upskilling to meet the markets requirements. Whilst this process takes place, rises in material, plant and labour costs are likely to be evident in the short term. Commercial office activity remains consistent. Low vacancy rates, and in turn rising rents across Sydney and Melbourne, have many tenants sitting on their hands. A move is likely to result in increased rents, so many are waiting to see out their current leases and/or focusing on maximising the efficiency and flexibility of their existing space. This trend is likely to continue until the next tranche of supply comes on stream in 2019/2020. Across the states and territories, confidence and construction activity remains elevated in New South Wales, Victoria, Australian Capital Territory and Tasmania. A bounce in the price of commodities is improving confidence in the resource states of Queensland, South Australia, Northern Territory and Western Australia. The effect of this should result in increased construction activity towards the later half of 2018 and continue into Lastly, it is expected that tender prices will increase by between 3% and 4% in 2018 for Melbourne and Sydney, with the remaining capital cities between 2% and 3%. 3 Australia and New Zealand

4 Macro indicators * Australia key statistics Units * GDP, current prices AUD$ billions GDP per capita, current prices AUD$ units Inflation, average consumer prices** Annual % change ** Population Persons, millions Current account balance AUD$ billions Notes: *Calculated from March 2017 to March 2018 **Forecast Source: Australian Bureau of Statistics * Value of construction output public/private Sector * AUD $m AUD $m AUD $m AUD $m AUD $m AUD $m AUD $m Building work Residential Private sector 46,652 50,264 57,015 66,113 74,007 74,704 75,390 Public sector 1, , ,094 1,094 47,772 51,235 57,978 67,199 74,998 75,799 76,484 Non-residential building Private sector 23,967 24,983 26,666 29,133 28,321 31,080 31,260 Public sector 10,062 10,433 9,796 7,981 8,753 10,129 10,520 34,029 35,416 36,462 37,114 37,073 41,209 41,781 Total building 81,801 86,651 94, , , , ,265 Engineering work Engineering Private sector 108, ,684 96,994 79,014 55,421 69,448 70,348 Public sector 34,494 32,624 27,054 26,440 29,448 34,205 35, , , , ,454 84, , ,795 Total construction 224, , , , , , ,060 Note: *The figures for 2018 are calculated from March 2017 to March 2018 Source: Australian Bureau of Statistics 4 Australia and New Zealand

5 * Currency exchange rates AUD$/USD$ AUD$/EUR Source: European Central Bank 5 Australia and New Zealand

6 Linesight average Australian construction costs 2018 Cost range AUD$ from to unit Commercial offices City centre air conditioned Shell and core (low - medium rise) 1,500 2,500 per sq.m. Developer standard (low - medium rise) 2,350 3,000 per sq.m. Shell and core (medium - high rise) 2,550 3,500 per sq.m. Developer standard (medium - high rise) 3,500 4,500 per sq.m. Residential Developer standard apartments (medium standard) 1,950 2,400 per sq.m. Developer standard apartments (high standard) 2,400 3,000 per sq.m. Leisure Hotel building (budget/3 star) 2,850 3,250 per sq.m. Hotel building (4/5 star) 4,150 4,750 per sq.m. Education Primary level (up to 3 stories, no air conditioning) 1,800 2,500 per sq.m. Car park Surface 2,600 3,100 per space Multi storey 20,000 25,500 per space Double level basement 27,500 49,000 per space Notes: i All subject to site specifics, design and specification. ii All exclude land acquisition costs, external works costs and professional fees. iii The above costs are for projects based in Sydney. Regional cost variances occur for projects in Adelaide, Brisbane, Canberra, Melbourne, Hobart and Perth. iv egional variances across the states can vary from -7% to +10%. Source: Linesight 6 Australia and New Zealand

7 Indices Building cost index by capital city Sydney Canberra Brisbane Melbourne Perth Adelaide Awa Source: Australian Institute of Quantity Surveyors Building cost index and consumer price comparison AIQS BCI CPI Note: AIQS BCI and CPI comparison, December 2017, Australian weighted average Source: AIQS 7 Australia and New Zealand

8 Main contractors List of tier 1, 2 and 3 contractors Tier 1 contractors CPB Contractors (formerly Leighton Contractors ) John Holland Laing O'Rourke Constructions Lend Lease Multiplex Probuild Tier 2 and 3 contractors ADCO Constructions AW Edwards BMD Group Brookfield Global Integrated Solutions Buildcorp Australia Built Cockram Downer Group FDC Construction & Fit Out Grocon Growth Build Hansen Yuncken ICON Construction Australia J Hutchinson Builders Mcmahon Patterson Building Group Renascent Richard Crookes Constructions Schiavello Shape Australia Taylor Construction Group Watpac Source: Linesight 8 Australia and New Zealand

9 Housing * Dwelling unit approvals Year New houses New other residential buildings Total dwelling units ,677 48, , ,515 41, , ,961 69, , ,636 58, , ,035 65, , ,967 80, , ,152 91, , , , , , , , , , , * 117,986 98, ,660 Note: * Prediction based on data to May 2018 Source: Australian Bureau of Statistics 9 Australia and New Zealand

10 New Zealand Market Review New Zealand has recorded another strong year of construction growth, with a 10% increase in building activity for the year to September New Zealand s construction industry recorded another strong year in 2017 with a 10% increase in building activity for the year to September The actual value of all building work for the third quarter of 2017 was NZ$5.5 billion (up 6.3% from the same quarter in 2016). These figures are impressive when viewed in isolation. However, when compared to the growth figures for 2016 (17% increase in building activity over the year and 22% increase in the third quarter), there are signs that the construction industry may be nearing peak capacity. In reality, the growth figures for 2016 and 2015 were not sustainable and a slow down year-onyear was expected. The constraints for growth do not appear to be a reduction in demand rather a lack of available skilled workers, speed to market and prohibitive costs. The solution may need to come in a variety of forms; through Government intervention (changes to immigration policy) and industry innovation (modular/ off-site fabrication). If these fundamental changes are to be implemented to avoid the predicted capacity bottleneck, a sentiment of willingness and urgency accompanied by investment will be required from both public and private sectors. Auckland and Canterbury continue to hold the lion s share of construction activity. Of the total value of building work put in place in the third quarter, approximately 56% came from these two regions. Activity is driven by demand for residential housing, ongoing earthquake repairs and investment in infrastructure, healthcare and education facilities. Overall, construction is one of the largest sectors in the New Zealand economy, generating approximately NZ$20 billion of gross revenues annually. The industry accounts for approximately 19% of the workforce, employing an average of 243,000 people annually. The current outlook over the short to medium term remains positive for construction in New Zealand. 10 Australia and New Zealand

11 Macro indicators Value of construction output NZ$m 14,000 12,000 10,000 8,000 6,000 4,000 2, Residential buildings Non Residential buildings Source: Statistics New Zealand * Employment in construction 250, , , , , * Note: *To March 2018 Source: Statistics New Zealand 11 Australia and New Zealand

12 * New Zealand key statistics Units * GDP, current prices* NZ$ billions GDP per capita, current prices NZ$ units 48,960 49,228 52,158 53,433 55,096 57,243 59,421 Inflation, average consumer prices Annual % change Population Persons, millions Current account balance NZ$ billions *Based on year end March Note: 1USD = NZD Source: Statistics New Zealand * Currency exchange rates NZD$/AUD$ NZD$/USD$ NZD$/EUR Source: European Central Bank 12 Australia and New Zealand

13 Linesight average New Zealand construction costs 2018 Cost range NZ$ from to unit Commercial offices City centre air conditioned Shell and core (low - medium rise) 1,850 2,100 per sq.m. Developer standard (low - medium rise) 2,450 3,400 per sq.m. Shell and core (medium - high rise) 2,600 3,400 per sq.m. Developer standard (medium - high rise) 3,300 4,200 per sq.m. Residential Developer standard apartments (medium standard) 2,150 2,850 per sq.m. Developer standard apartments (high standard) 2,700 3,400 per sq.m. Leisure Hotel building (budget/3 Star) 3,300 3,950 per sq.m. Hotel building (4/5 Star) 4,250 5,300 per sq.m. Education Primary level (up to 3 stories, no air conditioning) 1,900 2,400 per sq.m. Car park Surface 3,100 4,200 per space Multi storey 22,000 26,500 per space Double level basement 31,500 3,500 per space Notes: i All subject to site specifics, design and specification. ii All exclude land acquisition costs, external works costs and professional fees. iii The above costs are for projects based in Auckland. Regional cost variances occur for projects in Waikato/ Bay of Plenty, Wellington, Remainder of North Island, Canterbury and Remainder of South Island. Source: Linesight 13 Australia and New Zealand

14 Housing Residential work by area NZ$m 1,500 1, Auckland Rest of North Island Canterbury Rest of South Island Waikato Wellington Note: Quarterly actual values by region Source: Statistics New Zealand * Dwelling unit commencements Year Apartments, townhouses, flats and units Houses Total ,298 16,158 18, ,449 12,976 14, ,701 13,066 14, ,483 11,112 12, ,816 13,733 15, ,262 16,721 19, ,441 18,359 22, ,195 19,038 25, ,804 21,310 28, ,114 21,022 29, * 4,146 8,578 12,724 Note: *From January to May 2018 Source: Statistics New Zealand 14 Australia and New Zealand

15 Australia Level George Street Sydney NSW 2000 Australia T: John Carleton john.carleton@linesight.com