CONSTRUCTION COSTS TO SOAR DURING REBUILDING PHASE

Written on the 4 April 2011

CONSTRUCTION COSTS TO SOAR DURING REBUILDING PHASE

QUEENSLAND rebuilding phase could see residential construction costs jump five percent in far north Queensland and some areas of south-east Queensland, according to property and construction cost consultants Davis Langdon.

In its The Impact of the Queensland Floods and Cyclone Yasi on Construction Costs report, Davis Langdon predicts over-demand for trades could see residential prices in south-east Queensland soar four to five per cent over the next 12 months.

Price rises in north Queensland are anticipated to further exceed previous forecasts.

“The unexpected boost in demand for materials and labour will see an increase in costs particularly on plasterboard and trades people, including electricians, joiners and carpenters,” says Davis Langdon’s Queensland cost management leader Phil Plant.

Plant says these increases are likely to be short-lived however, particularly in areas like Cairns where a lack of major projects will see a quick return to competitive pricing.

With approximately 26,000 homes in Brisbane and 3,000 in Ipswich reportedly affected by flooding and extensive damage in north Queensland from Cyclone Yasi, Davis Langdon has welcomed the establishment of the Australian Government Reconstruction Inspectorate to oversee rebuilding works.

“By scrutinising rebuilding contracts early in the process, particularly for complex projects, the Government can be confident that every dollar gets spent wisely and helps community concerns around value for money,” says Plant.

“One suggestion is to consider setting fixed rates with contractors as a measure to help mitigate excessive cost escalation.

“There are many procurement approaches but selecting the right approach needs to be done carefully, to help ensure balanced outcomes.”

The non-residential market will see building price rises in far north Queensland of three to five per cent over the next 12 months, with more modest increases in the south-east of less than three per cent due to the current lack of major construction opportunities.

Davis Langdon’s report also says one of Queensland’s biggest challenges will be the extensive reconstruction of infrastructure, including road, power, water, waste and telecommunications services.

It is estimated that the total repair bill from the floods and Cyclone Yasi is expected to exceed $5 billion, however Queensland has several factors in its favour in dealing with the aftermath of these disasters.

“Generally speaking, there is sufficient spare capacity to manage the rebuilding,” says Plant.

“The current surplus of labour in Queensland following the global financial crisis will help ease price pressures in the long term, however, some short term spikes may be unavoidable.”


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