Padghams' Barometer

In today's economic climate, the current and projected construction market is being influenced by:

• Falling business confidence
• Reduced access to finance for new projects
• Projects being put on hold until change in the financial conditions
• Declining new building approvals
• Increasing competition among general contractors and sub-contractors
• Increasing prices of concrete and structural steel
• Residential activity recovering due to government stimulus packages and first home owner's grants

Industry predictions indicate:

• Engineering, commercial and retail segments will incur significant decreases in activity
• Residential apartments will also decrease in activity
• Health and education segments will remain steady particularly in public funded projects.

The reduced construction activity will place downward pressure on building prices. Localised spikes in prices may be expected due to the Building the Education Revolution funding.

Tender prices are expected to remain stable over the next 6-12 months, followed by a moderate increase in prices.

Padghams' forecast cost increases for the metropolitan area are:

Padghams' assessment of Building Price Movement over the past 10 years and the year ahead (expressed as an Index) for Victoria is depicted in the graph opposite.

Padghams recommends that the following factors also need to be considered independently for each project, in addition to the general cost trends:

• Project type (complexity or sequence of construction)
• Project location (labour and materials availability)
• Procurement method
• Labour awards, enterprise bargaining agreements, etc.
• Labour productivity
• Unique materials and building technologies
• Unusual tender market conditions (building activity cycles).

Please contact Technical Services Director, David Jones, to discuss the Padghams Building Price Index and its relevance to your project.