SEQ building pipeline overflows
5 May, 2022
The South-East Queensland building pipeline has never been bigger.
We estimate there is currently $17.5 billion left to be completed on approved building projects across Brisbane, the Gold Coast and Sunshine Coast (Figure 1: Unprecedented SEQ building pipeline).
Much of the media attention has been on the house building boom sparked by HomeBuilder and other government stimulus. Without a doubt this has been a bigger-than-usual driver, particularly in regional Queensland.
In South-East Queensland, however, commercial scale building (apartments and non-residential) is a big part of the story. In fact, the value of the commercial pipeline today is larger than it was at the peak of the apartment boom in mid-2016.
So whether you build with bricks or cranes, you’re no doubt juggling a very full book of work. But we expect the pressure to start easing this year.
The government stimulus that underpinned so many of these projects is now well and truly in the rear-view mirror. And with rate hikes just around the corner, you can fully expect to see fewer construction loans being written by the banks.
As a result, we expect residential building approvals to be back to their pre-COVID levels later this year (Figure 2: Investment fading fast). Less action at the front-end means the pipeline will start thinning, but the delays caused by material labour shortages mean it will take longer than usual for activity to normalise.
Labour shortages have been a huge problem during the pandemic. The effective shutdown of mobility during the pandemic dried-up the normal flow of tradies around the country. Despite a manic recruitment drive, there was simply nobody around to hire.
Here too, we are starting to see some light at the end of the tunnel. Vacancies are still elevated, but they have at least stopped rising. More importantly, we are finally starting to see trade employment rise above pre-pandemic levels for the first time this cycle (Figure 3: Labour supply returning).
While we are still a long way short of the labour required to comfortably digest the forward pipeline of projects, this data is a positive sign that new labour is entering the market.