Master Builders Australia (Master Builders) recently forecasted a mixed recovery across the three major sectors of Australia's building and construction industry (residential building, non-residential building and engineering construction) in the three-year period to 2015-16.
Master Builders' chief economist, Peter Jones, said "the forecast improvement in building and construction conditions is set against a background of the two speed economy with weak activity outside of mining, fiscal consolidation, poor sentiment, a high Australian dollar and the soft labour market."
Master Builders forecasted the value of residential building work done to improve strongly, albeit from a low base, over the next three years, following marginal growth in 2012-13. The value of residential building work done, in real terms, is expected to grow from $46.2 billion in 2012-13 to $60.9 billion in 2015-16.
Master Builders predicted that dwelling starts will rise to 164,000 in 2013-14, 179,000 in 2014-15 and 183,000 in 2015-16.
"The stronger performing states are forecast to be Queensland, New South Wales and Western Australia. The key risks to the forecasts are frail consumer confidence, economic uncertainty, asset price volatility and ongoing softness in the labour market," said Mr Jones.
Non-residential building work done is predicted to decline further in real terms in 2012-13, followed by modest growth in the following years.
"For non-residential building, [the] strongest performing states are forecast to be New South Wales, Queensland and Victoria, with industrial, retail and office building leading the way. The key headwinds and risks are poor cash flows, low margins and tough lending criteria. Investor confidence also remains low reflecting current economic conditions," explained Mr Jones.
Master Builders indicated that engineering construction activity would also likely remain solid, forecasting a 5.4 per cent increase in activity over 2012-13, before a 12 per cent fall-back over the following three years.
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