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With the economy appearing to stabilise, has the construction industry fared as well?
The following article provides an insight into the current market situation and offers a depreciation tool to
help sell your next development.
A recent report published by CommSec Economics (August 26, 2009) highlights some interesting trends currently
developing within the construction industry:
- Construction work done fell by 0.1 percent for the June quarter;
- The bulk of construction activity is occurring in Queensland ($8.64 billion) and Western Australia ($8.07 billion) - the resource states;
- Non-residential work has been deflated by the global financial crisis (GFC) and is expected remain subdued for the remainder of this year;
- The $1.5 billion rise in education sector building approvals in June (thanks to the Rudd government’s “Nation Building and Jobs Plan”) is expected to have a flow on effect for the construction industry in coming months.
- Over the past three quarters, construction costs are showing signs of correcting as new work continues to dry up.
This is in complete contrast to last year where building costs continued to climb as builders struggled to complete developments.
Selling a New Development
When selling a new development, there is a tool that can be provided by BMT to help in securing
early sales and provide a value added service to the purchaser. BMT can provide your
development with tax depreciation estimates. A tax depreciation estimate will ensure that investors
are easily able to determine their after-tax cash position if they were to purchase that particular
property.
The depreciation estimate will show a minimum and maximum range of depreciation for marketing
purposes. The report will show the expected depreciable plant and equipment within the building
and the Division 43 construction write off allowance. The estimate will provide enough scenarios to
cover the range of property available for purchase within that development.
The estimates can be completed on all property types, including multi-unit residential, commercial, industrial and retail property.
BMT Tax Depreciation generally provides these estimates FREE OF CHARGE. BMT Tax Depreciation will prepare the
Depreciation Estimates anticipating that we will complete Capital Allowance & Tax Depreciation Reports for the investor purchasers.
Estimating Construction Costs
For the first time since the introduction of GST into the Australian economy, and on the back of declining activity over
the past 12 months, construction costs across all sectors are showing signs of falling. In some areas, strong competition is
driving prices as much as 3% lower. While considered good news for the building industry, tender prices are expected to
remain in a holding pattern for at least the next quarter. However, with government stimulus measures gaining
momentum, this is likely to be short lived with price increases expected during the fourth quarter.
For the time being the construction sector appears doomed to be held back by both the cost and difficulty of
obtaining finance. Although, while demand for residential property continues to grow and the circumstances
surrounding the GFC showing signs of receding, this downturn could prove relatively short lived when compared to
previous cycles.
BMT continually stay up to date on changes to the construction industry so that our construction cost estimating remains
accurate. We liaise with members across the industry including builders, developers, architects and financiers to stay
aware of any economic changes so that our estimates best reflect the current market situation. Our services are broad
and include indicative elemental estimates (basic estimate), indicative cost plan and budget estimates, as well as tax
depreciation services.
Please do not hesitate to contact directors Brad, Brendan or Tom at the office for more information on our services.
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