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Boom and gloom for construction industry

Business

The fortunes of the state’s construction industry are split, with residential builders swimming in a flood of grant-inspired inquiries while the commercial sector struggles with a lack of major projects.

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More than 7000 South Australians registered interest in the Federal Government’s $25,000 HomeBuilder grant in the first month of its launch, on June 4.

Since then many first home buyers have signed on to build, creating an estimated 700 jobs and returning confidence to the residential sector.

The State Government also this month trumpeted its “record $12.9 billion pipeline” of civil construction projects, which mainly comprises new roads and upgrades to troubled intersections.

However, the Master Builders Association of SA says the non-residential or commercial side of the construction industry has been overlooked, and is now suffering from a lack of projects as confidence evaporates.

MBA SA policy and communications director Will Frogley said the peak body and a number of other organisations had lobbied the State Government to bring forward a number of projects to boost the commercial construction sector.

He said these proposed projects included bringing forward construction of the new Women’s and Children’s Hospital, new buildings such as a music hall in the Riverbank Precinct, a second city stadium and refurbishment and maintenance work on government buildings.

“In commercial construction, the private work has really dried up and again that’s a confidence thing so we’re really looking to the government to increase its spend,” Frogley said.

“Now’s the time for maintenance on existing government buildings, now’s the time for social housing, now is the time to invest in the Riverbank Precinct and new sporting facilities.

“When governments generally talk about construction they focus on civil infrastructure projects, but you get a lot more bang for your buck with residential or commercial because a lot more people work on those jobs than civil, and also the main contractors for commercial and residential are here in South Australia so the money stays here.”

The value of building and construction in South Australia was $11.96 billion in 2018/19. Of this, about half was civil construction, 28 per cent residential and 22 per cent commercial.

The final figures for 2019/20 are yet to be finalised but in April the residential construction industry was on track to build 10,396 homes; an increase of about 290 homes on the previous year, but well down on the 13,063 homes built in 2017/18.

HomeBuilder grant recipients are required to commence construction within three months.

However, under the HomeBuilder guidelines released this month recipients can apply for a three-month extension if there are factors beyond their control preventing them from meeting the deadline. such as issues with council approvals, banks or inclement weather.

Metro Homes is a major home builder and land developer in South Australia, constructing 269 homes and is on track to build even more this year on the back of the HomeBuilder boost.

The company employees 45 staff and about 200 contractors and managed to keep all of its staff throughout the COVID-19 pandemic.

Metro Homes Director Steve Weightman said inquiries had “gone through the roof” since HomeBuilder was announced in June.

He said the company had already employed four new sales and admin staff to cope with the influx of inquiries and hoped to boost on-site numbers when the pipeline of new projects began construction later in the year.

“People are certainly moving forward to a purchase but the big question is what percentage of people interested will follow through,” Weightman said.

“Most builders’ order books would have been OK prior to COVID and would have seen activity on site for the rest of the year anyway, and the new sales are going to allow activity on-site to continue through at good levels from later on this year until at least three quarters of next year.”

ABS figures earlier this month showed there were 715 building approvals for private homes in SA in May, up from 670 in April. Despite it being before the announcement of HomeBuilder, the May figure was the highest monthly figure for SA since October.

Weightman said on-site work generally began up to six months after a sale, meaning that a significant increase in residential building site activity would likely not be apparent until November.

He said the residential construction year started well until the second week of March, when inquiries and sales dropped off once the fullness of the COVID implications came through.

“Surprisingly April was OK and May was good and once the stimulus hit the sales and inquiries went through the roof in June and again this month,” he said.

However, Weightman said there was a lack of registered residential land available in Adelaide, leading to a supply shortage that could dampen the HomeBuilder surge.

“The word is out there that there is a lack of land so every block is getting snapped up to get a home and land deal put together on it.

“We’re getting a very sharp drawing forward of business and the land supply will run out before the appetite of the customer does.”

There were 70,000 people employed in South Australia’s construction industry in March, with the figure falling to about 67,500 in May and moving back above 68,000 last month.

The Master Builders Association of SA runs a group training program for 130 apprentices across several trades including carpentry, plumbing and electrical.

Frogley said builders “handed back” 15-20 apprentices when the pandemic first took hold but took them back on when wage assistance measures kicked in a few weeks later.

He said the association revised its forecast down to 6500 new homes for 2020/21 in April but now believed it could again exceed 10,000.

“When COVID first hit we were really worried and we were getting quite a few hand-backs but fortunately a few things the government has done to assist with apprentice wages has really helped and now we’re actually up on where we were in March, so that’s a great result,” he said.

“Right now we don’t have the June building figures from the ABS so we really need to see those figures over the next few months to get the accurate picture, but all I know is that every builder we’re speaking with is very upbeat about HomeBuilder, they are getting a lot of sales and inquiries coming in.

“Talking to everyone in the industry, back in May it was all doom and gloom and now everyone has got a spring in their step.

“(But) the private work is really drying up in commercial construction so that’s where we need the government to really step up.

“Master Builders has put a whole heap of suggestions of where we think money could be well spent and hopefully a few of those suggestions will be taken up.”

The State Opposition last week launched its ‘infrastructure scorecard’ accusing the Marshall Government of stalling or abandoning several construction projects including the new Women’s and Children’s Hospital, an Aboriginal Arts & Culture Gallery and an inner-city stadium.

It also accused the government of not having a final design or construction timeline for the completion of the North-South corridor.

SA Labor leader Peter Malinauskas said construction work had declined by $300 million since the March 2018 election, contributing to the state having the worst unemployment rate in Australia.

“Experts have predicted there will be an economic disaster when JobKeeper ends, so it is vital we get started on big infrastructure projects that will employ thousands of South Australians,” he said.

Before his resignation yesterday as Transport and Infrastructure Minister, Stephan Knoll said 18 projects under construction or soon to be underway would generate up to $5.7 billion in economic benefit and create almost 1300 jobs.

However, the four major projects he detailed in a recent press release were all civil engineering works including the $354 million Regency to Pym Street project, the $322 million Port Wakefield and Joy Baluch upgrade projects, the $98 million Portrush/Magill Intersection upgrade, and the $13 million Main North/McIntyre/Kings Road upgrade.

“The Marshall Government’s record $12.9 billion pipeline of infrastructure works is boosting our economy and creating thousands of jobs,” Knoll said.

“Over the next four years, more infrastructure will be built in South Australia than any other four-year period in our state’s history.”

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