A rapid increase in new apartment development has driven a positive construction industry results despite material delivery issues continuing to stymie its recovery.
Supplier deliveries contracted for the ninth consecutive month while prices and wages remained steady at an elevated rate, according to the latest Performance of Construction Index.
Meanwhile, the sector’s key inhibitors are expected to continue to escalate prices with RLB construction and property consultants predicting tender prices would increase by more than 3 per cent annually until 2025.
The Australian PCI results were an improvement from the summer period and its Omicron outbreak, signaling the industry’s recovery as apartment construction jumped in the index and housing approvals, particularly for apartments, skyrocked in the recent Australian Bureau of Statistics results.
New orders, commercial activity and employment increased at a high rate in the Australian PCI series, where results above 50 indicate expansion and under 50 represent contraction.
Australian PCI results for March
| Index | Change | Result |
| Australian PCI | ▲3.1 points | 56.5 |
| Activity | ▼0.4 points | 56.1 |
| Employment | ▲ 11.8 points | 66.1 |
| New orders | ▲0.3 | 55.7 |
| Housing activity | ▼4.1 | 54.2 |
| Apartment activity | ▲6.3 | 56.3 |
| Commercial activity | ▲4.5 | 63.3 |
| Engineering activity | ▼2.7 | 53.6 |
| Supplier deliveries | ▲1.3 | 43.2 |
| Input prices | ▼1.0 | 94.9 |
^Source: Australian PCI, March 2022
Ai Group chief policy advisor Peter Burn said the major hurdles of input price pressures included freight costs.
“Businesses reported they were recovering at least some of their higher costs in the market,” Burn said.
“Unless further disruptive factors intervene, it appears likely that current activity levels will continue over coming months, although the capacity to lift activity in the face of the supply pressures is becoming increasingly challenging.”
HIA economist Tom Devitt said strong housing market conditions were continuing, almost a year after the end of HomeBuilder.
“The availability of land, labour and materials is the salient constraint on builders, rather than any absence of demand,” Devitt said
“The associated affordability concerns in the detached market are likely to increase the appeal of units, townhouses and apartments, especially upon the return of overseas migrants, students and tourists.”
Tender price forecasting
| City | 2020 | 2021 | 2022F | 2023F | 2024F | 2025F |
| Adelaide | 0.2% | 7.1% | 4.0% | 3.0% | 3.0% | 3.0% |
| Brisbane | 4.1% | 9.6% | 5.1% | 4.1% | 3.0% | 3.0% |
| Canberra | 3.0% | 3.8% | 3.8% | 3.3% | 3.0% | 3.0% |
| Darwin | 0.8% | 1.2% | 4.0% | 5.0% | 4.0% | 4.0% |
| Gold Coast | 4.5% | 14.5% | 6.7% | 4.1% | 3.0% | 3.0% |
| Melbourne | 1.0% | 3.5% | 4.0% | 3.5% | 3.5% | 3.5% |
| Perth | 1.5% | 13.5% | 8.0% | 4.7% | 3.2% | 3.0% |
| Sydney | 0.0% | 4.1% | 5.6% | 3.7% | 3.5% | 3.5% |
| Townsville | 1.0% | 10.4% | 8.2% | 4.0% | 3.0% | 3.0% |
^Source: RLB Australian Report first quarter 2022
The latest quarterly report from Rider Levett Bucknall on tender prices found the same factors influencing pricing in 2021 were being seen in 2022.
This included price increases for cement, steel, PVC-based products and metal along with shipping costs and labour, which are expected to continue for the next six to 12 months.
Tender prices went up at the highest rate in Queensland cities as well as Perth. RLB said this is set to continue increasing just above 3 per cent annually across all cities until 2025.
