Michael Hermans’ Post

It’s quite staggering, but unfortunately unsurprising. My recent experience suggests that most commercial and residential projects are already proving unviable based on a combination of lower gross realisations, higher borrowing costs, increased holding costs (taxes) and already high construction costs. By increasing the cost of labour will simply result in less cranes 🏗️ in the air, the shedding of jobs and less homes (read: increased housing affordability issues). However, needless to say, supply and demand will, in time, inevitably self correct these changes, but it will take time particularly when most sites have alternative holding income options.

Construction cost increases picked up again in the June quarter however it was Western Australia that showed the most significant acceleration in costs, dashing hopes of cheaper home availability. Labour continues to be a major contributor to the cost of construction and year-on-year increases in wages remain problematic to bringing down the cost of building a new home. The Australian Bureau of Statistics specifically pointed to a lack of finishing trades. Strong union activity, now the subject of a Senate inquiry has also contributed to low productivity in the industry. For the full report >>>https://lnkd.in/gkjTBN64

According to the Rider Levett Bucknall RLB 4th Quarter 2024 Construction Market Update for Australia, the Australian construction industry faces a complex and challenging landscape as we approach 2025, with economic, logistical, and labour-related hurdles impacting growth. Ewen McDonald, Director of RLB Oceania Research & Development said, “While the Australian economy is projected to grow by 2.1% in 2025, up from 1.2% in 2024 (driven by a recovery in consumer spending and strong government expenditure), the construction sector is grappling with significant issues.” He added, “Skilled labour shortages are a significant concern, driving up wage costs and creating intense competition for available workers in addition to many key challenges moving forward.” Read RLB's analysis ▸ https://lnkd.in/gtJ34x2s

Housing Executive Magazine has featured a comment piece from our Director Nick Towe which focuses on how modern methods of construction (MMC) can help build the homes Britain needs.   In the piece Nick explains how we are going to need to look at innovative ways to build new homes if we want to scale up construction and meet the ambitious target of delivering 1.5 million homes over the next three years set by the Labour Government.   Read the article here: https://bit.ly/4fRMF74

Construction activity grew at its fastest rate in more than two years with a surge in civils work helping keep a bellwether index in positive territory for the fifth successive month. The S&P Global UK construction Purchasing Managers’ Index rose to 55.3 in July from 52.2 in June, the fastest rise in growth since May 2022. The report said: “All three categories of construction saw activity increase in July as work on housing projects returned to growth. “Commercial activity increased solidly but the fastest expansion was seen in civil engineering activity, where the rate of growth quickened to the sharpest in almost two-and a half years.” Andrew Harker, economics director at S&P Global Market Intelligence, admitted: “The election-related slowdown in growth seen in June proved to be temporary.” The report said staffing levels increased for the third month running to keep up with demand, although increased demand on supply chains was putting the brakes on availability. Thomas Pugh, economist at RSM UK, said: “Moves by the new government to ease planning restrictions have probably boosted sentiment, especially around house building. The cut in interest rates in early August will be followed by at least one more cut this year, which will also be supportive of the housing market, which should feed through into housebuilding. “As a slight note of concern, the input price balance rose to 53.7. There is clearly a huge shortage of skilled labour in the industry and as output ramps up, demand for that limited pool of labour may put upward pressure on costs.” [Building] #civilengineering

In recent years, Ireland has witnessed a convergence of economic and societal factors, including inflationary pressures, the lingering effects of the COVID-19 pandemic, the invasion of Ukraine and supply chain disruptions through the Red Sea and the Panama Canal. and the shortage of qualified tradespeople in the construction sector. Inflationary pressures, exacerbated by the economic fallout of the COVID-19 pandemic, have sent shockwaves through the construction sector in Ireland. The rising cost of materials, fueled by supply chain disruptions, increased demand and energy costs has become a primary driver of escalating building costs. From timber and steel to cement and insulation, the price surge in raw materials has significantly inflated construction budgets, putting strain on developers, contractors, and homebuyers alike. Against this backdrop of economic uncertainty, Ireland is witnessing a shift towards sustainable building practices and energy-efficient design. With a growing emphasis on environmental responsibility and regulatory compliance, developers are increasingly incorporating green building technologies and renewable energy solutions into their projects. However, navigating the complex web of building regulations and compliance standards poses additional challenges, further complicating cost estimations and project timelines. The shortage of qualified tradespeople has further strained project timelines and productivity levels. With fewer skilled workers available to meet the growing demand for construction projects, delays and cost overruns have become increasingly common, posing significant challenges for stakeholders across the industry. As Ireland grapples with the far-reaching implications of inflation on building costs, it is imperative for stakeholders to adopt a holistic approach to address the challenges at hand. By embracing innovation, leveraging technology, and investing in workforce development initiatives, the construction industry can adapt to the evolving landscape and navigate the complexities of inflationary pressures with resilience and determination. Together, we can chart a course towards a more sustainable and prosperous future, where the foundations of our built environment are anchored in resilience and efficiency. https://lnkd.in/eH3MR6sc

Not in the sector any more but sad to see Surgo lose fight for survival, thats virtually the North East independant construction sector wiped out by, framework agreements, financial crash, covid and inflation RIP: Whelan, Turney Wylde, Dorin, Howard Russell, Tolent, FHM, MMP and all the others. Not really a good reflection on the strength of the NE economy if we aren't building or investing enough in infrastructure to support this sector. https://lnkd.in/guCN2mmb

UK construction sector records fastest growth in two years. Britain's construction sector recorded its biggest rise in activity in two years last month, including the first rise in house-building since just after former Prime Minister Liz Truss' mini-budget, a survey showed today. Read more: https://lnkd.in/gwjGnD7Q #Construction #ConstructionSector #ConstructionNews

Today’s announcements show a government with the firepower and the initiative to tackle some of the big issues. A clear contrast to the budget handed down in Victoria earlier in the week. The budget shows how important a strong construction industry will be to support WA’s strong economy over the next four years. The main priorities to support more housing, diversification and decarbonization of the economy and delivering cost of living support all rely heavily on the construction industry. The budget estimates state that housing is one of the main contributors to inflation in WA and therefore to the cost-of-living pressures. Building capacity in the construction sector to boost housing supply is one of the best things we can do to bring down the cost of living. Read the full release: https://ow.ly/LUy550RA61P

With 650,000 construction workers, Canada is primed to boost housing production, potentially adding 130,000 to 225,000 homes each year. However, to achieve this and support the Federal Government’s housing goals, substantial changes are necessary, especially in regulatory processes at various governmental levels. It's time to accelerate our efforts and close the housing supply gap. Check out this thought leadership article to learn more: https://ow.ly/1iFg50RT3zZ