Multi-unit construction to surge: BIS Shrapnel

08 Aug 2011 - real estate business

Multi-unit residential construction activity was the one bright spot in an otherwise subdued outlook for overall residential building in 2011/12, with activity unlikely to meet demand, BIS Shrapnel said today.

This is in sharp contrast to commercial and industrial building activity, which was expected to surge in the same period, BIS Shrapnel said in its Building in Australia 2011 report.

The company said national building commencements are expected to show only a moderate recovery of eight per cent in 2011/12, after an estimated 12 per cent decline in 2010/11.

It said the fall in building activity in 2010/11 was largely due to the winding down of construction related to the ‘Building Education Revolution’ program, although this would be offset by a rebound in commercial and industrial building.

“The continuing recovery in commercial and industrial building – up 21 per cent – will be a key driver of the improvement in building commencements in 2011/12, while increased construction in the health sector – up 73 per cent – will also play a part,” said BIS Shrapnel managing director, Robert Mellor.

“With the Australian economy largely recovering since the GFC, the environment has become more conducive for commercial and industrial development. There is also $7 billion in new hospitals and other health care facilities due to commence in 2011/12, particularly in Victoria, Queensland, South Australia and Western Australia.”

Mellor said residential building is forecast to remain flat in 2011/12 after being negative in 2010/11, following the expiry of the First Home Owner‟s Grant Boost Scheme, as well as the winding down of the Federal Government public housing stimulus.

“The decline will more than offset an otherwise healthy rise in multi-unit residential starts,” the company said. “That rise is largely due to the improved financial environment which allows developers to be increasingly able to fund apartment projects.”

“The value of new dwelling starts is forecast to remain relatively flat - up one per cent - in 2011/12,” Mellor said. “Despite weakening net overseas migration inflows, which have fallen from a record 300,000 persons in 2008/09, to an estimated 165,000 in 2010/11, construction nationally still remains below the level of underlying demand, although in some states the market is closer to balance.”