Data released by the Australian Bureau of Statistics indicates the possible emergence of construction cost pressures during 2010, according to international property and construction consultants Davis Langdon.

Construction work done during the March quarter 2010 was 2.7% higher than that recorded for the December Quarter 2009. This increase was contributed to by a rise of 25% in Public Sector Non-Residential Building work done.

Dr Andrew Wilson, Senior Economist and National Research and Development Manager for Davis Langdon commented that the Building the Education Revolution (BER) construction initiative had had a major impact, along with rises in residential construction due to the effect of the First Home Owners Grant initiative.

“Construction workloads are now approaching the record levels of late 2008’ Dr Wilson said. ‘With BER work still to be completed and significant mining and infrastructure projects already in the pipeline, together with early signs of a recovery in commercial and industrial construction, capacity constraint concerns are emerging for the industry”.

“Skilled labour and material shortages and a less competitive tender market for contractors will mean building cost pressures will emerge over the shorter-term.”

“Already evidence is appearing of wage and salary rises in certain construction trades and professions. A lower dollar will increase the cost of fuel and other imported goods and building components. Higher interest rates will also impact on construction costs.

“With the prospect of rapidly increasing workloads through 2010 and into 2011, building cost escalation would expect to approach four percent per annum and higher in some markets. The clear current challenge for policy makers is to expeditiously address the prospect of severe skill and labour shortages in the construction industry.

 For further information, contact Meaghan Jones on +61 3 9933 8800 or email mjones2@davislangdon.com.au