13/02/2007 - 22:00

No let-up in cost of construction

13/02/2007 - 22:00

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Despite talk of a softening housing market in Western Australia this year, there is still no relief on the horizon for developers from rising construction costs, higher wages and material shortages.

No let-up in cost of construction

Despite talk of a softening housing market in Western Australia this year, there is still no relief on the horizon for developers from rising construction costs, higher wages and material shortages.

The simultaneous boom across all property market sectors has reportedly stretched resources beyond capacity and left the Perth market under-resourced.

Reed Construction Data national costing manager Mike Bartlett said the value of non-dwelling construction in WA rose six per cent to $1.81 billion in 2005-06, and should increase a further two per cent to $1.84 billion this financial year.

Rising approvals in the hotel, commercial office, education and health sectors are expected to drive the increase. 

“Growing household consumption, massive business investment which was up 51 per cent in 2005-06, dwelling investment, government expenditure, skilled labour shortages and a growing population have set the scene for continuing prosperity,” he said.

Master Builders Association of WA director of housing and economics Gavan Forster said the situation of supply and labour problems were ongoing and there would be no immediate change.

“WA’s subdued housing market is not reflected by any easing of construction pressures. There’s just too much work in the pipeline for that to happen,” Mr Forster said.

“The cost of labour and price pressures for supplies are two of biggest challenges facing the construction and building industries this year.”

Mr Forster said construction prices across 2007 would be nowhere near the 14 per cent rise of 2006, and would instead be in the vicinity of between five and ten per cent this year, keeping rates well above anticipated CPI increases.

Periodic delays in sourcing supplies were the nature of the game, he said, and steel would continue to be  highly sought this year.

“On the whole, the industry is very resilient and bottlenecks in the market don’t pose too many issues. The industry is innovative and will always find ways of overcoming it,” he said.

Property market analysts Davis Langdon also believe construction levels will remain high this year, tipping resources will be stretched to capacity, in part due to the state government’s growing capital works program.

In its Outlook 2007 report, the group predicts construction tender prices will increase by 9.2 per cent in 2007, down from the 14.1 per cent increase recorded in 2006.

Doric contracts and technical services manager Richard Kendall agreed with the forecast rise and said the commercial construction company was sensing two things - longer lead times for prime materials, and the continued siphoning of labour by the mining and resource sector.

“The people issue is one for the whole industry. Doric’s got a very strong core team, but it’s building on this that is the challenge,” he said.

A reported shortage of cranes due to demand in Asia, was a matter of getting advanced notice and planning accordingly, he said.

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