The Australian construction industry is one of the largest growing sectors in the country. Massive investments continue to be made in this area. The total construction project market (building and civil engineering projects, excluding the detached housing sector as well as mining, oil and gas) is predicted to show steady growth of 8.2% total in the current financial year 2018/2019. This compares with a healthy increase of 11.7% for the previous financial year ending 30 June 2018. This is lower than previous years but there continues to be growth in the sector.
These figures are influencing (and is being influenced by) population growth, housing, technology, and labour. Let’s have a look at some of the statistics that provide valuable insights into the state of the sector today and what we can expect in the years ahead.
- Australia’s population is continuing to grow
Australia’s population increased rapidly over the past decade, lifting by 3.755 million, or 17.9%, according to the Australian Bureau of Statistics (ABS).
As seen in the chart above from the National Australia Bank (NAB), Australia’s population increase in percentage terms was only behind Saudi Arabia and New Zealand based on data from the United Nations and other national statistical agencies.
According to NAB, “Strong population growth has been a key driver of growth for the Australian economy in recent years, supporting housing demand, consumption, infrastructure requirements while also boosting labour supply,” it says. Furthermore, “The key driver of variation in population growth continues to be net overseas migration (NOM) which contributed 240,000 to population growth of 388,000 in 2017.” These migration figures have helped boost labour force participation.
Population growth is contributing to rising demand for new structures in both the residential and commercial space
2. There is an increasing aging population in Australia
Australia’s aging population is increasing at a rate of approximately 3.5% per year over the past 15 years. Therefore, it is predicted that there will be large scale investment and development in construction of aged care facilities throughout Australia, particularly the Sydney area in 2019. This increase is also due to increased technologies within the industry itself. This can be seen throughout Sydney with many works occurring on new facilities and updating of older facilities
3. Building construction is seeing a continued rotation from Residential to Non-Residential
Growth in Residential construction peaked around the end of 2016 and it appears the decline will continue through the 2018/2019 financial year but with continued improvement in the non-residential categories such as Hospitality, Industrial and Health. This falls in line with population growth in urban areas of the city, where we’re bound to experience more commercial structures scraping the sky. In fact, 50% of the population is now settled in one of our 11 major cities (with Sydney and Melbourne accounting for 40% of the country’s total population).
4. The development of new construction technology is opening the door to a completely different industry paradigm.
According to the “Digital Foundations” report, there is an increase of 2.8% in productivity every year within the construction industry. They attribute this increase to technology developments, new building techniques and improved materials. For example, they found that there has been a $98 million invested in Australian construction technology start-ups since 2016. Therefore, it is estimated that successful digital solutions could provide an increase of $25 billion year on year within the decade.
New construction focused equipment, such as robotics, prefabrication, 3D printing and drones, are likely to become more commonplace. This inevitably will increase productivity and decrease the likelihood of human error. Improving safety, improved quality, shortening completion time and achieving cost reduction, are amongst the benefits of transitioning to digital, according to the paper. Drones are being used, for example, to survey dangerous areas and sites with limited access. Thus, technology is going to allow for the construction industry to grow at an exponential rate.
Although there has been a lot of media focus on the downturn of residential projects within the Australian market, research shows that investment in the construction industry continues within other sectors.