What’s Causing Commercial Construction Prices to Rise?

Construction tender prices are either rising or holding steady in every one of Australia’s states and territories. Read about the factors behind this trend.

There’s a Shortage of Trade Workers

Australia is facing a long-term shortage of skilled construction workers because there aren’t enough new apprentices to meet growing demand and replace retiring trade workers. Experts suggest we’ll need somewhere between 13,000 and 15,000 new trainees to join the construction trade every year until the end of 2019 to satisfy this. This number is conservative, as it doesn’t consider the trainees needed to replace those advancing in the building trade or leaving to pursue other professions. Yet just 12,325 Aussies complete building apprenticeships in Australia today. That leaves the construction industry with a significant shortfall. When tradespeople are in demand, construction firms must pay more to secure their services, which results in higher prices for clients.

Apartment Boom Fuels Subcontractor Shortage

Apartment construction is growing at the fastest pace recorded in the Australian Industry Group and Housing Industry Association index’s 10-year history. High levels of apartment construction activity are predicted to continue to at least the 2018/2019 financial year. Subcontractors are so busy with these projects, according to quantity surveying group WT Partnership, there’s little time to devote to other projects. This creates bottlenecks in the construction process, which blows out costs. With such demand, subcontractors also know they can afford to be more selective and command higher wages. In turn, these higher fees increase the total construction costs.

The Depreciated Dollar is Also to Blame

The Australian dollar’s poor performance against the Greenback has also hurt the Australian residential and commercial construction industries. Cost pressures could increase if United States interest rates rise, according to WT Partnership. Prices might be rising, but at TPM Builders, we pride ourselves on always providing fair and transparent quotes. Call us at 1300 733 891 to learn more about our tender pricing. Market pressures dictate that construction firms are wary of price increases. However, these factors are likely to maintain pressure on Australian construction companies’ costs. Image via Flickr by mikecogh