Australia: Construction market moves into significantly stronger territory

The Royal Institution of Chartered Surveyors (RICS) has released its latest Global Construction Monitor, which highlights gathering strength in the Australian construction industry in 2025. The strength is primarily being driven by private non-residential, infrastructure and public works. The Monitor also reports continued, mounting pressure in terms of cost of materials, skills shortages and labour shortages

According to the survey, the Construction Sentiment Index (CSI) has regained significant momentum moving back to 2023 levels at +21 from +15. The strength in construction is coming from private non-residential work (moving from +9 to +11) and infrastructure / public works (which recorded a +24 from +20). Private residential work retreated from a very strong +24 to +16.

Looking more closely at infrastructure, the energy sector recorded significant strength (+49), as did water and waste, transport and ICT. Agribusiness remained in negative territory moving from -14 to -9.

In terms of current conditions cost of materials escalated to near pandemic levels at +70, headcount issues eased to +14, new business enquiries have also moved to near pandemic levels at +17 and profit margins continue to remain subdued.

Expectations for the next 12 months remain firmly in positive territory across all main sectors with private non-residential continuing to strengthen to +31, consistent with increased confidence being recorded in this sector. A net balance of +42 of respondents expect infrastructure workloads to rise, with private residential and infrastructure/public works each projected to grow by +31 and +42 respectively. Headcount rose steeply to +50 and profit margins moved out of negative territory for the first time since 2024 to record +20.

Skills shortages continue to record the highest response (+68) followed very closely by labour shortages (+61).

The continuing issue of skills shortages particularly for skilled tradespeople (+65), quantity surveyors (+63), and managers (+46) remains a significant constraint holding back the sector with potential future reforms to address this issue expected in the May budget.

Credit conditions have moved sharply into negative territory for past three month (-12), next three (-10) and twelve month (-12) periods.

Vishant Narayan FRICS, Member of the RICS Australasia Regional Advisory Board

“This quarter’s Construction Sentiment Index shows significant and returning strength across Australia’s construction sector particularly in energy and transport.

As construction activity stridently moves into positive territory the federal government’s work to address productivity issues, particularly by making immigration and visa processes simpler and the prospect of introducing national occupational licensing, needs to remain a matter of focus for 2026.”

Read the full report.