The build­ing and con­struc­tion indus­try is sig­nif­i­cant and com­plex, with a land­scape which is con­stant­ly changing.

It is cur­rent­ly char­ac­terised by: 

  • sig­nif­i­cant pub­lic invest­ment in nation­al infra­struc­ture with a $213 bil­lion pipeline over 5 years to finan­cial years 2027 – 28
  • plan­ning approval delays par­tic­u­lar­ly in NSW
  • high costs of construction
  • con­tin­u­ing and increas­ing con­struc­tion relat­ed insolvencies
  • a chron­ic short­age of housing
  • a move towards built to rent’ and land lease com­mu­ni­ties and devel­op­er con­tri­bu­tions to afford­able hous­ing as the cost of hous­ing con­tin­ues beyond the reach of many Australians
  • the uncer­tain ongo­ing demand for office tow­ers because of COVID and the impact of the now gen­er­al­ly accept­ed work from home’ option
  • the devel­op­ment of new assets class­es such as pur­pose-built stu­dent accom­mo­da­tion and data centres. 

Indus­try regulation

The con­struc­tion indus­try is char­ac­terised by much law and reg­u­la­tion rang­ing from gen­er­al con­tract law to WHS law to plan­ning and envi­ron­men­tal law to employ­ment law and indus­try spe­cif­ic law such as the secu­ri­ty of pay­ment and in NSW the Design & Build­ing Prac­ti­tion­ers Act 2020 (NSW) and Res­i­den­tial Apart­ment Build­ings (Com­pli­ance and Enforce­ment Pow­ers) Act 2020 (NSW). 

Fur­ther reform in NSW is expect­ed with the NSW Build­ing Bill 2024, the Build­ing Insur­ance Bill and the Build­ing Com­pli­ance and Enforce­ment Bill all at var­i­ous stages of review and consultation. 

In addi­tion, the stan­dard of con­struc­tion work is gov­erned by the Nation­al Con­struc­tion Code (NCC) (of which the Build­ing Code of Aus­tralia forms a part) which is updat­ed every 3 years, based on required reg­u­la­to­ry prac­tices, indus­try research, pub­lic feed­back and pol­i­cy direc­tions from gov­ern­ments between pub­lish­ing cycles. The cur­rent NCC ver­sion is NCC 2022 which was due to be replaced in this year (2025) how­ev­er the Aus­tralian Build­ing Codes Board, respon­si­ble for the update and main­te­nance of the NCC, has advised that the adop­tion of NCC 2025 has been delayed. 

Reg­u­la­tion is a sig­nif­i­cant cur­rent indus­try focus and dri­ver of far-reach­ing indus­try reform. In NSW devel­op­ers and con­trac­tors are sub­ject to com­pli­ance with the Home Build­ing Act, the Stra­ta Scheme Man­age­ment Act, the Design & Build­ing Prac­ti­tion­ers Act and the Res­i­den­tial Apart­ment Build­ings (Com­pli­ance and Enforce­ment Pow­ers) Act to name a few. In NSW, a 400+ per­son strong Build­ing Com­mis­sion has been estab­lished to improve qual­i­ty and safe­ty with­in the NSW con­struc­tion indus­try and has been giv­en sig­nif­i­cant enforce­ment pow­ers aimed at the restora­tion of the trust wor­thi­ness of com­plet­ed buildings.

Addi­tion­al­ly, the NSW reform pro­gram has seen the mar­ket respond with the intro­duc­tion of an indus­try-led mar­ket sur­veil­lance tool which guides and assists prin­ci­pals and home­own­ers in their choice of build­ing con­trac­tors. Con­trac­tors can obtain an iCIRT rat­ing (Inde­pen­dent Con­struc­tion Indus­try Rat­ing Tool) to which uses a star-rat­ing method­ol­o­gy of assess­ment across the fol­low­ing six cat­e­gories: capa­bil­i­ty, con­duct, char­ac­ter, capac­i­ty, cap­i­tal and coun­ter­par­ties. The rat­ing sys­tem ranges from 0 to 5 stars and only par­ties with 3 or more gold stars are includ­ed on the iCIRT reg­is­ter. See here for more infor­ma­tion on iCIRT rat­ings or to search the iCIRT register. 

The applic­a­ble laws, reg­u­la­tions, the NCC and BCA and the mar­ket require­ments and respons­es are con­stant­ly chang­ing and evolv­ing, and this presents chal­lenges, risks and rewards for all indus­try participants. 

Cur­rent indus­try challenges

Devel­op­ers, project financiers, home­own­ers and con­trac­tors all face a num­ber of indus­try chal­lenges up and down the con­tract­ing chain.

In no par­tic­u­lar order, the fol­low­ing chal­lenges cur­rent­ly impact the deliv­ery of a suc­cess­ful con­struc­tion project:

  • con­tin­u­ing and increas­ing con­struc­tion relat­ed insolvencies
  • labour and skill shortages
  • increas­ing costs of construction
  • increased indus­try regulation
  • avail­abil­i­ty of appro­pri­ate insur­ances to man­age risk including:
    1. the gap risks in cur­rent­ly avail­able pro­fes­sion­al indem­ni­ty poli­cies avail­able in the mar­ket; and
    2. the emer­gence of a 10 year defect insur­ance prod­uct for apart­ment build­ings (decen­ni­al lia­bil­i­ty insurance).

These chal­lenges make the agreed allo­ca­tion between the devel­op­er and the con­trac­tor of time and cost risk as doc­u­ment­ed in the con­struc­tion con­tract, of utmost importance.

What do the cranes tell us

The pres­ence and num­ber of cranes on a city sky­line often indi­cates the lev­el of con­struc­tion activ­i­ty in a city. More cranes is gen­er­al­ly indica­tive of increased activ­i­ty. Whilst cranes are gen­er­al­ly preva­lent on large scale projects, the num­ber of large scale projects has ram­i­fi­ca­tions for small and mid-size projects by influ­enc­ing for example:

  • the avail­abil­i­ty and allo­ca­tion of con­struc­tion mate­ri­als and sub­con­trac­tor resources – short­age of labour and skills and mate­r­i­al sup­ply issues such as concrete
  • the effect of demand and sup­ply on sub­con­trac­tor pric­ing – dri­ving up increased costs of construction
  • the pub­lic and reg­u­la­to­ry response to large scale project fail­ures – result­ing in whole of indus­try reforms dri­ven in part by for exam­ple the Opal Tow­ers and Mas­cot Tow­ers defect dri­ven evacuations.

The Rid­er Lev­ett Buck­nall Crane Index for Q12025 found here notes the fol­low­ing inter­est­ing indicators:

  • 840 cranes on site across Aus­tralia (down from 863 in Q3 – 2024)
  • Of the 840 cranes nation­wide 373 are in Syd­ney, fol­lowed by 199 in Mel­bourne, 65 in Bris­bane, 59 on the Gold Coast and 41 in Perth.

The Rid­er Lev­ett Buck­nall Crane Index for Q12025 makes the fol­low­ing observations:

  • Crane sec­tor move­ments between Q32024 and Q1-2025 shows growth in data cen­tres and mixed use projects
  • Res­i­den­tial sec­tor remains rel­a­tive­ly sta­ble with crane num­bers nation­al­ly reduc­ing mar­gin­al­ly from 492 to 487
  • Whilst most cities expe­ri­enced mod­er­ate change or remained sta­ble, Syd­ney, Perth and Can­ber­ra faced a decline.

Con­clu­sion

The build­ing and con­struc­tion indus­try is a sig­nif­i­cant and com­plex indus­try, where the risks are both high and reward­ing and the land­scape is for­ev­er chang­ing. Chal­lenges arise from inap­pro­pri­ate project risk allo­ca­tion, con­trac­tu­al oblig­a­tions, increas­ing indus­try reform and com­pli­ance with and inter­pre­ta­tion of the Nation­al Con­struc­tion Code.

Our expe­ri­enced and expert con­struc­tion team can pro­vide guid­ance and assis­tance through the full life cycle of your project pro­vid­ing com­mer­cial, expert and prac­ti­cal sup­port and advice through every stage of your project.

If you would like to repub­lish this arti­cle, it is gen­er­al­ly approved, but pri­or to doing so please con­tact the Mar­ket­ing team at marketing@​swaab.​com.​au. This arti­cle is not legal advice and the views and com­ments are of a gen­er­al nature only. This arti­cle is not to be relied upon in sub­sti­tu­tion for detailed legal advice.

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