Construction Industry Report

Construction
Industry Report
2017
Industry Division Industry Groups
Construction Residential Building Construction
Non Residential Building Construction
Industry Subdivision
Residential Building Construction
Non Residential Building Construction
Construction Services
The ANZSIC is a hierarchical classification with four levels, namely Divisions (the broadest level),
Subdivisions, Groups and Classes (the finest level). At the Divisional level, the main purpose is to provide
a limited number of categories which provide a broad overall picture of the economy and are suitable
for the publication of summary tables in official statistics. The Subdivision, Group and Class levels
provide increasingly detailed dissections of these categories for the compilation of more specific and
detailed statistics.
Data referenced in report
All data referenced in this report has been updated with the latest available figures when prepared as
at October 2016. Figures may vary from previous reports due to revision by providers (ABS, RBA, IBIS,
etc.) or updated calculations by CoreData.
Data sources used include:
›› ABS: 8165.0 Counts of Australian Businesses, including Entries and Exits, Jun 2011 to Jun 2015
released 26/02/16
›› ABS: 8155.0 Australian Industry, 2014-15 released on 27/05/16
›› ABS: 6291.0.55.003 Labour Force, Australia, Detailed, Quarterly, May 2016 released on 23/06/16
›› ABS: 8752.0 Building Activity, Australia, Jun 2016 released 12/10/16
›› ABS: 6427.0 Producer Price Indexes, Australia, Jun 2016 released on 29/07/16
›› ABS: 5671.0 Lending Finance, Australia, Aug 2016 released 14/10/16
›› RBA Interest rates and yields money market, September 2015 released on 01/11/16
›› Residex: Median Sale Price Data at capital city level ending June 30 2016
released on 7/11/16
IBISWorld Reports:
›› E Construction in Australia Industry Report
›› E3011 House Construction in Australia Industry Report
›› E3019 Multi Unit Apartment and Townhouse Construction in Australia Industry Report
›› E3021 Commercial and Industrial Building Construction in Australia Industry Report
›› E3231 Plumbing Services in Australia Industry Report
›› E3232 Electrical Services in Australia Industry Report
Based in part on Bankwest Economic Updates, Australian Bureau of Statistics data used pursuant to the Creative Commons Attribution 2.5 Australia license (available
online at: http://creativecommons.org/licenses/by/2.5/au/) and the following Specialised Industry Report E Construction in Australia Industry Report, E3011 House
Construction in Australia Industry Report, E3019 Multi-Unit Apartment and Townhouse Construction in Australia Industry Report, E3021 Commercial and Industrial
2
Building Construction in Australia Industry Report, E3231 Plumbing Services in Australia Industry Report, E3232 Electrical Services in Australia Industry Report
Construction
Industry Overview
The Construction industry division includes units engaged in the construction of buildings and other
structures, additions, alterations, reconstruction, installation, maintenance and repairs of buildings and
other structures. Within this industry division, the major sub industries and industry groups are
construction services, residential building construction and non residential building construction.
The industry plays a significant role in the Australian economy, with the division’s total income
representing 12.5% of all industries (excluding Financial Services) higher than its proportion of the total
workforce.
The Construction Services subdivision is one of the largest sources of employment in the Australian
economy. It includes a number of industry groups and classes, such as bricklaying, roofing, plumbing,
electrical and painting and decorating services.
Industry Revenue Number of Number of Construction

(FY2014-15 ) Construction Workers Businesses
$368.3 billion (FY2014-15 ) (June 2015)
1.04 million 351,617
Average Profit Margin Proportion of Businesses Exiting Number of Construction Businesses

10.6% Market in 2015 with more than
15.0% $2 million in turnover in 2015
19,440
Construction
›› Construction Services, Residential Building Construction and Non Residential Building Construction all sit
within the larger Construction industry division.
›› As an industry, Construction is the third biggest contributor to workforce numbers, employing 1,040,000
Australians or 9.8% of the working population.
›› Employment levels have remained relatively flat over the past eight years, with a marginal decline of 2.0%
over the past year.
›› Total income has been increasing steadily since 2007-08 to $388.3 billion.
›› Revenue in the Construction industry division accounts for 13.5% of all industry revenue, and roughly 9.8%
of the total workforce.
›› Profit margins for the industry are in line with the average for all industries, with operating profit before tax
of only 10.0% of total income, compared with 10.3% for the average of all industries.*
›› As at June 2015, there were 351,617 construction businesses in Australia, which is proportionally the largest
number of businesses by industry division with 16.4% of the total for all industries. The industry had an
annual exit rate of 15.0%, and a slightly lower entry rate of 14.3% for the 2014-15 period.
Construction Employment
1,200 1,069 1,039 1,048 1,059 1,038
983 983 998
1,000
(,000 Employed)
800
600
400
200
0
2007–08 2008–09 2009–10 2010–11 2011–12 2012–13 2013–14 2014–15
Source: ABS
* Excludes Insurance and Financial Services
3
Construction Total Income
$500
$388.34
$361.76
$400 $320.39 $333.24
$287.04 $304.60
$257.51 $264.95
($ Billion)
$300
$200
$100
$0
2007–08 2008–09 2009–10 2010–11 2011–12 2012–13 2013–14 2014–15
Source: ABS
Construction Profit Margin

17.0% Construction All industry
15.0% 13.2% 12.9%

12.0% 12.2%
13.0% 11.2% 11.4%
11.0% 10.9%
11.0% 12.6%
9.0% 10.2%
10.2%
9.7% 9.4%
7.0% 8.9% 9.1%
7.9%
5.0%
2007–08 2008–09 2009–10 2010–11 2011–12 2012–13 2013–14 2014–15
Source: ABS
What’s driving the industry?

›› Housing affordability & loan rates Median house prices in Australia’s two largest residential housing
markets have skyrocketed over the past five years, with Sydney prices increasing by 54.5% and Melbourne
prices increasing by 25.6%. The median house price in Sydney now stands at $1,012,000, up from
$655,000 in 2011. The booming property markets are driving increased demand for new residential
construction and construction services.
›› Dwelling approvals After reaching a 10 year high in 2015, dwelling approval growth steadied during the
year ending June 2016, although is up by 39.4% over the past five years. Much of this growth is attributed
to multi level apartment blocks, with developments centered around Sydney, Melbourne and Southern
Queensland and to a lesser extent, Perth. Growth in residential high density construction is also
associated with larger non residential construction as governments look to equip areas with urban
infrastructure.
›› Commercial space Labour force growth is trending downwards, impacted by the economic slowdown in
part due to the end of the mining construction boom. Reductions in insurance and financial services
related jobs have reduced demand for prime commercial space in the capital cities.
›› Retail turnover Increasing turnover from the retail industry is linked to demand for non residential
construction as retailers look to open new premises. Retail turnover remains above the average rate of
the past five years, although it has been trending downwards since mid 2015.
4
Australian Retail Turnover, Annual Change (%)
10.0%
8.0%
6.0%
4.0%
2.0%
0.0%
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Source: ABS
Annual Dwelling Approvals Australia (2005 – 2016)

260,000
240,000
Dwelling approvals
220,000
200,000
180,000
160,000
140,000
120,000
100,000
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Source: ABS
Capital Cities, Median House Value, 2011 vs 2016

2011
$1,000 880
2016
$800
592 622.5 605 565
533 502.5 500 485 522.8 442 497
$600
395 440
'000
330 355
$400
$200
$0
Sydney Canberra Melbourne Darwin Perth Brisbane Adelaide Hobart
Source: ABS
Australian Workforce, Annual Change (%)
4.0%
3.5%
3.0%
2.5%
2.0%
1.5%
1.0%
0.5%
0.0%
-0.5%2006 2008 2010 2012 2014 2016
Source: ABS
5
Construction Services Industry Subdivision
›› The construction services subdivision, which sits within the larger construction industry division, is one
of the largest sources of employment in the Australian economy. It includes a number of industry
groups and classes, such as bricklaying, roofing, plumbing, electrical and painting and decorating
services amongst others.
›› The 684,800 workers in the subdivision represent almost two in three people employed within the
Construction industry division. The largest number of workers are based in NSW, with 211,000, followed
by Victoria (177,700) and Queensland (145,700).
›› Employment in the subdivision has been fairly flat over the last decade. During the past 12 months,
employment has increased only marginally by 2.5%. This has been driven by a year on year increase in
the number of workers in NSW, Victoria and Queensland, offset by a year on year decrease in the
number of workers in Western Australia.
›› The industry has relatively low barriers to entry, which have led to a large number of businesses relative
to the workforce, with 262,136 businesses across Australia. The majority of these businesses are small,
with 61.7% having revenue of less than $200,000, and only 79 employing more than 200 people.
›› Despite the low entry barriers, consolidation is expected, driven by an increasing trend of medium and
higher density housing developments over single dwellings. These developments will typically
subcontract services such as electrical and plumbing requirements to larger firms to increase efficiency.
Construction Services Industry Subdivision Businesses In Operation

(State, Number of Employees)
Operating at the end of FY 2014-15
Non 1-19 Employees 20-199 200+ Total

Employing Employees Employees
New South Wales 44,724 36,589 835 20 82,168
Victoria 39,709 27,050 57 13 67,345
Queensland 31,447 21,077 766 14 53,304
South Australia 11,011 5,408 187 3 16,609
Western Australia 21,069 11,311 489 29 32,898
Tasmania 2,466 1,500 38 0 4,004
Northern Territory 1,374 918 64 0 2,356
Australian Capital 1,922 1,489 41 0 3,452

Territory
Total 153,722 105,342 2,993 79 262,136
6
Number of workers Construction Services, by State, 2015-2016
250
211
196.5
200 177.7
162.1
145.7 2015 2016
'000 Workers
150 127.1
107.6
100 79.6
41.1 41.8
50
11.9 12.5 10.7 8.2 11.5 8.3
0
NSW VIC QLD SA WA TAS NT ACT
Source: ABS
Number of workers Construction Services, 2006-2016

800
600
'000 Workers
400
200
0
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Source: ABS
Construction Services Industry Businesses In Operation (State, Turnover)
Zero to less $50k to less $200k to less $2m or more Total

than $50k than $200k than $2m
New South Wales 13,065 37,884 27,577 3,642 82,168
Victoria 10,739 31,449 22,414 2,743 67,345
Queensland 8,712 23,481 18,612 2,499 53,304
South Australia 2,630 8,089 5,231 659 16,609
Western Australia 4,630 15,171 11,310 1,787 32,898
Tasmania 733 1,760 1,337 174 4,004
Northern Territory 296 957 879 224 2,356
Australian Capital 483 1,544 1,247 178 3,452

Territory
Total 41,288 120,335 88,607 11,906 262,136
Source: ABS
7
Residential Building Construction Industry Group
›› The Residential Construction industry group is part of the Building Construction subdivision, and is
comprised of construction of houses, apartments, units, townhouses and other residential buildings.
›› The industry group employs 384,500 workers across Australia more than one in three workers in the
construction industry. Driven by a property boom in the eastern seaboard states of NSW and Victoria, the
industry group is expected to be one of the leading sources of growth for the construction industry over the
next decade.
›› Construction Industry wide employment has fallen slightly in the last 12 months by 0.1%. The largest number
of workers are based in NSW (74,000), an increase of 2.0% in the past 12 months. On the other hand, the
number of workers in Victoria, Queensland and Western Australia have fallen during this period.
›› Despite relatively low barriers to entry, this industry group has a large number of providers that have a
relatively high business turnover, with 5,617 out of 59,424 businesses across Australia operating at more
than $2 million in annual revenue. The Northern Territory has the highest proportion of larger businesses,
with 18.6% of businesses earning more than $2 million, while Tasmania has the lowest proportion (6.3%).
›› Nearly two in three (63.4%) businesses in this industry group are ‘non employing’ businesses, meaning they
are mostly sole traders. There has been a considerable increase in the number of sole traders over the past
12 months and their proportion of total businesses, according to the ABS.
Residential Building Construction Industry Group Businesses In Operation (State, Turnover)

New South Wales 3,792 6,039 6,388 1,598 17,817
Victoria 4,431 5,717 6,049 1,621 17,818
Queensland 3,000 3,920 4,431 1,235 12,586
South Australia 750 1,035 1,014 255 3,054
Western Australia 1,308 1,673 1,804 617 5,402
Tasmania 241 390 471 74 1,176
Northern Territory 80 109 162 80 431
Australian Capital 236 306 461 137 1,140

Territory
Total 13,838 19,189 20,780 5,617 59,424
Source: ABS
Number of workers Residential Construction , By State, 2015-2016

200
155.3
136
150
2015
'000 Workers
87 81.8 2016
100 74.6
63.9
44.8 39.4
50 21.3 21.8
13 6.6 5.3 6.6 3.7 8.1
0
Source: ABS
8
Residential Building Construction Industry Businesses In Operation (State, Number of Employees)

New South Wales 10,381 7,329 100 8 17,818
Victoria 11,848 5,878 84 9 17,819
Queensland 7,995 4,497 93 0 12,585
South Australia 2,129 906 18 0 3,053
Western Australia 3,625 1,697 77 3 5,402
Tasmania 752 419 5 0 1,176
Australian Capital 720 410 11 0 1,141

Territory
Total 37,693 21,307 404 20 59,424
Source: ABS
Non Residential Building Construction Industry Group

›› The Non Residential Construction industry group is part of the Building Construction subdivision, and consists
of businesses mainly engaged in the construction of buildings in commercial, retail and heavy industry
property developments.
›› It is a relatively small industry group within the wider Construction industry division, employing 46,400
workers, or 4.5% of the total industry division workforce. The industry has seen a substantial increase in its
workforce in the last 12 months growing by 36.1%. The largest increases have occurred in NSW, South Australia
and Queensland.
›› NSW currently has the largest proportion of the workforce (16,100), followed by Queensland with 10,800
workers. Employment growth is expected to lag behind growth in revenue over the next decade, with firms
expected to rely on sub contractors rather than increase permanent employment. The Non Residential
Construction industry group tends to be more concentrated than Residential or Construction services, with
18.2% of businesses having annual revenue exceeding $2 million.
›› Occupancy rates for commercial buildings have trended downwards over the past five years, with the after
effects of the global financial crisis still lingering in the sector. Perth office vacancy rates hit a 23 year high in
June 2016, according to BIS Shrapnel, driven by the downturn in the mining industry.
›› The value of commercial building starts has been relatively variable since 2012, contrasting with the steady
upward trend in residential property starts. Furthermore, growth in commercial building starts is expected to
continue at a slower rate than residential property starts.
9
Non residential Building Construction Industry Group Businesses In Operation
(State, Turnover)

New South Wales 864 1,318 1,484 625 4,291
Victoria 936 1,074 1,238 514 3,762
Queensland 602 850 894 364 2,710
South Australia 164 211 238 96 709
Western Australia 387 423 543 223 1,576
Tasmania 44 71 65 24 204
Australian Capital 54 53 83 36 226

Territory
Total 3,079 4,035 4,587 1,917 13,618
Source: ABS
Number of workers Non residential Construction, By State, 2015-2016
18 16.1
16
14 11.8 2015
10.6 10.8
'000 Workers
12 2016
10 7.3
8 5.9
5.1 4.8
6
4 2.2
1.1 1.4 0.9 1.1 0.7
2 0.4 0.3
0
Source: ABS
Number of workers Non residential Construction , 2005-2015

60
50
'000 Workers
40
30
20
10
0
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Source: ABS
10
Non Residential Building Construction Industry Businesses In Operation
(State, Number of Employees)

New South Wales 2,393 1,791 94 13 4,291
Victoria 2,508 1,164 85 5 3,762
Queensland 1,737 902 67 4 2,710
South Australia 460 229 19 0 708
Western Australia 1,035 499 42 0 1,576
Tasmania 123 74 6 3 206
Australian Capital 138 84 4 0 226

Territory
Total 8,474 4,789 330 25 13,618
Source: ABS
Industry Outlook
›› The mining construction boom has ended, with overall construction in Australia expected to decline by
0.4% in 2016-17.
›› Housing construction revenue is anticipated to fall by 6.2% in the year ending June 2017, with interest
rates expected to rise. Mining regions will also see reduced housing construction, as the population in
these regions falls.
›› Multi unit apartment revenue is expected to fall by 17.3% over the same period, as new construction over
the previous 5 years has exceeded demand requirements. Commercial construction is expected to
bounce back from its 2016 decline to remain steady and increase by 0.8% for 2017.
›› Interest rates and housing affordability are going to have a major impact on construction growth over
the next five years. Interest rates are expected to rise in 2017, dampening construction investment as the
cost of borrowing rises. Banks have already looked to reduce the risk of their portfolios and make lending
requirements more stringent on the back of Australian Prudential Regulatory Authority demands to cap
investor lending growth at 10% per year.
Construction Industry Division Actual and Projected Revenue
440
420
400
$ Billion
380
360 Actual
340 Projected
320
300
2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18 2018-19 2019-20 2020-21 2021-22
Source: ABS
11
The information contained in this publication is of a general nature and is not intended to be nor should
it be considered as professional advice. You should not act on the basis of anything contained in this
publication without first obtaining specific professional advice. To the extent permitted by law,
Bankwest, a division of Commonwealth Bank of Australia ABN 48 123 123 124 AFSL/Australian credit
licence 234945, its related bodies corporate, employees and contractors accepts no liability or
responsibility to any persons for any loss which may be incurred or suffered as a result of acting on or
refraining from acting as a result of anything contained in this publication.
BWA-02 121116
Bankwest, a division of Commonwealth Bank of Australia ABN 48 123 123 124 AFSL/
Australian credit licence 234945

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Construction

Industry Revenue Number of Number of Construction

Average Profit Margin Proportion of Businesses Exiting Number of Construction Businesses

* Excludes Insurance and Financial Services

Construction Profit Margin

15.0% 13.2% 12.9%

What’s driving the industry?

Annual Dwelling Approvals Australia (2005 – 2016)

Capital Cities, Median House Value, 2011 vs 2016

Australian Workforce, Annual Change (%)

Construction Services Industry Subdivision Businesses In Operation

Operating at the end of FY 2014-15

Non 1-19 Employees 20-199 200+ Total

New South Wales 44,724 36,589 835 20 82,168

Victoria 39,709 27,050 57 13 67,345

Queensland 31,447 21,077 766 14 53,304

South Australia 11,011 5,408 187 3 16,609

Western Australia 21,069 11,311 489 29 32,898

Tasmania 2,466 1,500 38 0 4,004

Northern Territory 1,374 918 64 0 2,356

Australian Capital 1,922 1,489 41 0 3,452

Total 153,722 105,342 2,993 79 262,136

Number of workers Construction Services, 2006-2016

Construction Services Industry Businesses In Operation (State, Turnover)

Operating at the end of FY 2014-15

Zero to less $50k to less $200k to less $2m or more Total

New South Wales 13,065 37,884 27,577 3,642 82,168

Victoria 10,739 31,449 22,414 2,743 67,345

Queensland 8,712 23,481 18,612 2,499 53,304

South Australia 2,630 8,089 5,231 659 16,609

Western Australia 4,630 15,171 11,310 1,787 32,898

Tasmania 733 1,760 1,337 174 4,004

Northern Territory 296 957 879 224 2,356

Australian Capital 483 1,544 1,247 178 3,452

Total 41,288 120,335 88,607 11,906 262,136

Operating at the end of FY 2014-15

Zero to less $50k to less $200k to less $2m or more Total

New South Wales 3,792 6,039 6,388 1,598 17,817

Victoria 4,431 5,717 6,049 1,621 17,818

Queensland 3,000 3,920 4,431 1,235 12,586

South Australia 750 1,035 1,014 255 3,054

Western Australia 1,308 1,673 1,804 617 5,402

Tasmania 241 390 471 74 1,176

Northern Territory 80 109 162 80 431

Australian Capital 236 306 461 137 1,140

Total 13,838 19,189 20,780 5,617 59,424

Number of workers Residential Construction , By State, 2015-2016

Operating at the end of FY 2014-15

Non 1-19 Employees 20-199 200+ Total

New South Wales 10,381 7,329 100 8 17,818

Victoria 11,848 5,878 84 9 17,819

Queensland 7,995 4,497 93 0 12,585

South Australia 2,129 906 18 0 3,053

Western Australia 3,625 1,697 77 3 5,402

Tasmania 752 419 5 0 1,176

Northern Territory 243 171 16 0 430

Australian Capital 720 410 11 0 1,141

Total 37,693 21,307 404 20 59,424

Non Residential Building Construction Industry Group

Operating at the end of FY 2014-15

Zero to less $50k to less $200k to less $2m or more Total

New South Wales 864 1,318 1,484 625 4,291