21 March, 2012 –Davis Langdon’s latest Construction Sentiment Survey shows that some residential and retail property sectors have reached the bottom of their cycle. However while construction costs remain subdued across several regions, investment is likely to strengthen.
The company’s key indicator of industry sentiment, Net Workload Expectation, rose to a positive reading of 6 per cent compared to a two-year low of -20 per cent in its previous survey.
Confidence levels in the residential sector dropped as participants identified strict lending requirements for residential sector development as a major barrier for private investment.
This quarter 27 per cent of respondents nominated the residential sector as most likely to contribute to growth, down from 41 per cent at the end of 2011.
Meanwhile, the industry is still battling fierce competition for a reduced work pool as well as dealing with ongoing regulatory hurdles. Impending labour issues and an inadequate skills base also present long-term downside risks.
While demand may pick up in some sectors, there is a minimal level of optimism in the business community about prospects for 2012, the report said.
Not seen since the final quarter of 2010, this marginally positive sentiment suggests that those expecting a turnaround in the next year outweigh those who foresee further softening.
This movement towards a slightly better outlook is evident in the state by state historical view of sentiment. Overall, 29 per cent of respondents expect more work for the industry over the next 12 months. This has improved notably since the end of 2011 when only 16 per cent expected an increased future workload.
This figure also reflects a sense of “it can only get better” as ABS statistics show that the value of building work completed dropped in all states and territories during 2011.
NSW, Queensland, SA and Tasmania were hit hard with work dropping by an average of 13 per cent on 2010 levels. These losses were particularly felt in the non-residential sector.
Looking ahead, the first quarter results show more optimism in Queensland and WA as expanding resources sector work aids their recovery.
There is less pessimism in NSW than during 2011, while Victorian respondents remain divided. Here, a considerable proportion (30 per cent) still believe workloads will reduce over the coming year.
These results confirm the mixed views coming out of different regions. Some see renewed activity, such as projects that were on hold starting up, while others expect workloads to increase as part of a productivity push within organisations trying to achieve more with their existing staff.
Views were also mixed across a range of industry practitioners. Optimism continued to increase among consultants and principal contractors with 50 per cent of consultants expecting their business to expand (up from 44 per cent).
While 56 per cent of principal contractors anticipate more new business across the next six months (up from 29 per cent).
However, architects remain uncertain with 29 per cent expecting to see a drop in new business – 53 per cent expect the majority of their work to come from the private sector and fewer are relying on work from the public sector.