The construction industry is patching up the cracks from Covid lockdowns with a “healthy” recovery in activity recorded, particularly for apartments.
A strong level of construction activity is expected over the next 12 months, according to the Australian Performance of Construction Index, which increased by 4.1 points in October.
New enquiries were also streaming in for projects with a big uplift in apartment building activity.
Apartment activity jumped 14.3 points to 64.3 in October, compared to an average of 46.4 in the past 12 months.
A score above 50 in the Australian PCI indicates expansion of activity while under that indicates a contraction, with the distance from 50 indicating the severity.
This compares to last year when some of the country’s top builders for apartments were outpaced by those who specialised in detached dwellings.
However, the pipeline is expected to further stretch skilled labour and material shortages, which are facing crunch time.
Australian Performance of Construction Index
| Activity | October | Monthly change | 12 month average |
|---|---|---|---|
| Apartment building | 64.3 | 14.3 | 46.4 |
| House building | 51.9 | 12.3 | 58.3 |
| Commercial building | 62.5 | 21.3 | 52.4 |
| Engineering construction | 76.9 | 15.1 | 55.1 |
| Australian PCI | 57.6 | 4.3 | 55.0 |
| Employment | 56.8 | -0.2 | 58.5 |
| New orders | 58.7 | -0.2 | 54.6 |
| Supplier delivers | 41.3 | -1.3 | 51.7 |
| Input prices | 97.2 | -1.2 | 89.4 |
| Selling prices | 78.3 | -0.5 | 71.1 |
| Average wages | 75.1 | -1.5 | 67.9 |
^Source: Australian Industry Group and HIA
HIA economist Tom Devitt said housing market confidence had bounced back as restrictions in Sydney and Melbourne eased.
“A healthy volume of new detached home sales is still entering the pipeline, six months after the end of the HomeBuilder stimulus,” Devitt said.
“Apartment construction activity also jumped in October.
“There has been a recent improvement in apartment approvals in New South Wales, Queensland and Western Australia.
“A surprisingly large number of multi-units also commenced construction in the June 2021 quarter. This will be helping support construction activity in October.”
Ai Group’s chief policy advisor Peter Burn said the states in lockdown were playing catch up but there were still challenges ahead.
“A high volume of new orders in October added to the already healthy pipeline of building and construction activity and will further stretch capacity limits and re-expose underlying shortages of skilled labour in many occupations over coming months,” Burn said.
“Pressures on input prices are being exacerbated by localised shortages and the more general disruptions to global supply chains.
“With the pace of wages growth also running high, builders and constructors are testing their ability to recover some of their higher costs from customers with some success.”
