Property and construction
Property and construction firms had a difficult 12 months, experiencing slow sales growth and a reduction in profits.
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However, they have set themselves optimistic short- and medium-term growth targets, suggesting they believe local or temporary factors currently holding them back are less likely to be an issue in the future. |  |
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Business growthSales growth and profits are downSales growth across the property and construction sector was a modest five per cent, which was slightly below the all-industry average. This is considerably lower than in the last PwC Private Business Barometer, when property and construction companies experienced an average 14 per cent sales growth. Profits in the sector fell four per cent on average. Profits in Western Australia, where there is a glut of available properties, dropped 18 per cent over the past 12 months. | |
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Big forecasts for the futureProperty and construction firms expect their fortunes to turn around considerably over the medium term. They forecast an average 14 per cent sales and profit growth in the next 12 months and a 24 per cent increase in sales and profits over the next three years. Businesses in New South Wales and Western Australia set high sales growth targets for the coming year (15 per cent and 20 per cent respectively), perhaps reflecting local factors such as the influx of overseas property investors in Western Australia and the then-anticipated change of state government in New South Wales. | |
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Relying on organic growthFirms in the property and construction sector had comparatively little appetite for acquisitions or expanding their operations overseas; most expected organic growth or geographic expansion within Australia to help them grow in the short and medium terms. | ||
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PeopleMore than half taking on new staffDespite the challenges of skills shortages and high wages, more than half (54 per cent) of property and construction firms surveyed said they were planning to hire in the next six months. Hiring intentions were strongest in Victoria and South Australia. | |
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Economic and people concernsIn terms of issues preventing businesses from hiring new staff, concerns were evenly divided between skills shortages, wage costs, lack of demand and economic uncertainty. Firms in South Australia were most concerned about a lack of qualified staff. Economic issues weighed heaviest on New South Wales property and construction businesses. | |
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FundingNot many plans for investmentLess than one-third (31 per cent) of property and construction businesses are planning to make a major investment in the next year, which is well below the all-industry average. This figure was even lower in New South Wales (28 per cent) and Victoria (21 per cent). Bank funding was the most likely source of finance for these investments, nominated by 20 per cent of respondents in this sector. | ||
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Property investment plansProperty and construction firms thinking about their pipeline for future work will be pleased to learn a quarter (25 per cent) of all businesses surveyed told us they were planning to invest in property in the coming year. Another encouraging sign: 37 per cent of businesses within the property and construction sector had property investment plans of some kind, even if they were not the major investments discussed above. | |
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Business operationsFunding challenges dominateConsidering the capital-intensive nature of the property and construction industry, it is not surprising that respondents named funding concerns as their greatest challenge – 79 per cent of businesses reported having one or more funding issues. However, the biggest individual challenge facing property and construction businesses at present is finding competent staff, which was a struggle for 50 per cent of respondents. This was followed by cash flow (40 per cent of respondents) and low margins and competitive pricing (39 per cent). | |
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