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:
- the gap risks in currently available professional indemnity policies available in the market; and
- 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 Q1 – 2025 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 Q1 – 2025 makes the following observations:
- Crane sector movements between Q3 – 2024 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.