Project Delays, Cost Overruns Drag Down Residential Construction

The value of residential construction is being weighed down by constraints in labour and material supplies, latest figures from the ABS show.

The Australian Bureau of Statistics said the value dropped 0.1 per cent, or $18.9 million, for June.

These results are likely to get worse with lockdowns to impact July results, when construction activity slowed for the first time in 10 months, according to the Australian PCI.

Delivery disruptions, material shortages and price rises were felt on sites across the country.

However, publicly funded work was boosting construction in other sectors with infrastructure projects in the eastern states as well as health, education and transportation facilities pushing the total value to $52.88 billion.

Value of construction work done

^{_{^Source: Australian Bureau of Statistics, June 2021}}

BIS Oxford Economics principal economist Nicholas Fearnley said significant project delays and cost overruns could be expected.

“The fall in activity over the June quarter points to supply chain issues weighing heavily on the sector,” Fearnley said.

“With both labour and material capacity constraints in play, significant project delays and cost overruns can be expected, especially given the elevated pipeline of work flowing from the now concluded HomeBuilder incentive.

“The considerable backlog of work that has developed should sustain an elevated level of activity for home builders through 2022 and into 2023.”

Across the country, the Northern Territory and Tasmania had the biggest boost in total value of construction with work done up 31 per cent and 22.3 per cent respectfully.

These areas were followed by South Australia up 15.3 per cent and Western Australia at 6.5 per cent.

New South Wales just held onto positive territory at 0.9 per cent however the lockdowns did not start until the end of June.

The value of construction was down in Victoria -5.9 per cent and Queensland -1.8 per cent.