Essay 1 of 10

Describe and discuss structure and characteristics of the construction industry?

Intro – (Construction is made up manufactured goods and labour)

Building is;
35% resi, 35% non resi and 20% Eng (Explain further in exam)

Mainly concerned with:

New Construction 60%, Additions and alteration 25%, renovations 10% and 5%
maintenance.

2 secotrs

Public 35% ( 70% eng, 25% non resi and 5% resi

Private 65%( 50% resi 30% non Resi and 20% eng

Economic characteristicsp;

15-20% of national income

6-10% of GDP

Cost of imports 25% for non resi and 5% for resi.

The construction industry represents 60 per cent of all new investment.

Total expenditure in Australia on construction is approx. $50 billion/year.

Essay 2 of 10

Describe and illustrate building cycles in general and supply and demand for new
housing?

Cycles in 60’s which occurred over 20 yr periods are experiences in 2 to 3 yr periods

in the current market

Property usually stabilises every decade with the danger of busts.

Important factors affect supply and demand;

Privatisation
Inflation rates
Business cycles and
Manufacturing

Government controls;
Fiscal – Annual Budgets
Monetary – On currency and investment

Supply can be expressed as;

Current area + Under Construction+ Approved For construction+ Proposed for

Construction + Future construction-(Demolitions and Time for Land Release)

Factors of Supply
Cost of Land
Adequate land Releases by Government

Demand

P+I+E

Population – Including immigrants, births, deaths and age demographics influencing

the market. Number of persons per dwelling(2.3)

Income – The Number of households that can purchase a particular market segment.

Employement – depends on the current market, at the moment due to expansionary

fiscal policy employment is very high near 1%.

Table. Supply demand table from Wikipedia

Effects of Demand;

Skill formations
Investment in R and D

Essay 3 of 10

How has economic thinking changed overtime, can neoclassical thinking be applied to
the construction industry.

Changes in government have caused the particular party to choose some form of bias
to a particular fiscal or monetary policy which controls the direction of the economy.

Neo classical;
- Price is determined by market
- Marginal costs means marginal revenues
- Reducing company productions outputs

Competitive construction tendering i.e hard dollar and costing a job before real prices
are known.

Reasons for the perfect competition;

- Tenders are all competitive
- Prices change due to demand
- Price as a soul competitive feature
- Lowest Price selection

Reasons for imperfect selection

- Size of firm and capacity
- Competitors may be to busy for the work
- Low Profits avg 4.3%
- Economies of scale
- Non price tender selection

Large companies which subcontract to builders increase profits as the cost to build
gets cheaper so they are able to retain savings to clients.

BOT projects- Private companies receive funding and enter agreements to do

devlopments of infrastructure works so that thay can Build own Transfer the property
back to the government.

Globalisation as the current market is to expensive for manufacturing and labour.

Essay 4 of 10

Discuss and Describe issues associated with affordable housing in Australia?

CDPACGL

1. Structure ;
8 million households with 2.3 people per dwelling
65-70 % owners with 35-50% of these people having mortgages
25 – 30% Rent and 77 % of these people rent of Private land lords.

2. Cycle
Housing market corrects every decade .
Cycles occurring in 20 yr periods in the 60’s are occurring in 3 -5 year periods in
today’s property climate.

3. Debt
Value of properties in 93 at54% and in 03 140%
85% of Households have Mortgages
Most families need to have dual incomes to pay the mortgage.

4. Price
Increased 95 % from 93-03
Price rise due to interest rates being reduce from 9.3% in 93 to 6% in 03
Also due to;
Low inflation rates, increase in employment, increased population.

5. Affordability

- It is measured by % of income being paid to mortgage

- 6% of first home buyers struggle to pay mortgages. 47% single income
earners, 35% people with dependents.
- Out of 8 Million Households in Australia the bottom 40% cannot afford to live
in any of the nations capitals.

6. Changing cities

Most cities of Australia are experiencing urban sprawl as there are cities outside the
CBD’s and creating townships so that there is less need to travel into the city.

7. Government Intervention

Land tax, exit tax, first home owners grant, capital gains tax, Stamp duty etc.

8. Lifestyles

People are having to make sacrifices to lifestyle to keep up with housing repayments.
Cost of Living.
Essay 5 of 10

Discuss and describe the direction of business are taking over the next 10 years?

Australian Market very Strong at the moment may be headed for a recession if
demand and supply do not meet equilibrium.

Demand May intensify over the next 10 years effecting;

Population,income and employment.

Manufacturing

Competition of Multinationals

Labour

Neo Classical Theory

SME’s and FTA with china

SME’s have low overheads and v completive with large companies.

Expansion

Mergers

Reduced Economies of Scale in China.

Essay 6 of 10

How does the government use the construction industry to regulate the economy?

Balancing Wheel

Fiscal Policy use of annual budgets and government spending

- Increase government expenditure
- Reduce tax

Goals; Full employment, Price stability, GDP and GNP, Balance of Payments

Expansionary Fiscal Policy- Increase demand, low unemployment but risk inflation

Contraction Fiscal Policy – Reduce inflation use overseas trade, low growth and high
unemployment.

Need a balance of fiscal and monetary policy

Monetary Policy – Focuses on controlling of currency and investments

Aims; Full employment price stablility and price stability

Comparison = Fiscal aims at short term and Monetary concerntrates on investments.

Structural Policies ;

- Deregulation
- Labour Refoms
- Wage policies
- Free Trade
- Privatisation
- Increased competition

Basic Circular flow of Money

Govt Profits 30% from tax 30 % from GST and 30% Mining and raw materials.
Essay 7 of 10

Discuss the Various Principals for successful investment in the property market?

Current Property market

Currently using Expansionary fiscal policy as demand for property is high and there is
a risk for inflation.

Yeild of ROI( Return on Investment;

Expresed as ; Profit from investments – cost of the investment/cost of the investment

Net yield Return after costs are deducted

Gross yield is the income minus the amount borrowed.

Capital growth

Negative Gearing

Growth areas in Australia

- Best Adelaide 29.5% where as SYD 6.3% from feb 07 -08 RPDATA!

- Commecial CBD in Sydney showed steady growth of 4% ( Landmark White

Property)

Warren Buffet/Berkshire Hathaway

Invest in companies which have;

Share buy backs

Use their return dividends
Steady Growth
Deal with inflation
Invest in Research and Development
Low Debts
Price earning ratio
Price/ Earning per share

Conclusion
Companies which guarantee a price earning ratio of 10-15

Fully franked dividends @ 10% yield

Essay 8 of 10

Theories of International trade and comparative advantage as they apply in the global
construction market?

Brief History of Trade and comparative advantage when Portugal was in English rule
the English could not make wine effectively as they could make cloth so they traded
cloth for wine.

Principals of international trade;

Productivity
Imports and Exports
Economies of Scale
FDI
Integration
Labour
TNC
Technologies
Govt Regs

Comparative advantages:
Cost structures
Neo Classical Theory

Business which turnover more then Australian states influencing the economy and the
global economy.
Essay 9 of 10

What it means to be an Entrepreneur what entrepreneurial skills are particular to the

construction industry?

Entrepreneur – One who controls an enterprise and has full accountability and risk of
the success of the business.

They tend to invest in land, labour, capital and research and development

They also;

- Think of the longterm benefits

- Develop markets within segments
- Improve existing resources
- Passionate experts
- Create employment

Skills required for the construction industry;

- Knowledge on the operation of the construction industry

- Innovation of current process and methodology in construction
- Experience in some particular aspect of the construction industry.
- Persistence
- Assessing costs
- Positive thinker
- Decision maker
- Pursuit of Opportunities
- Focus on Long term growth.
Essay 10 of 10

What does Globalisation Mean for Australian Construction Firms.

Privatisation of Public Works

Deregulation of stop go policies
Technology
BOT and BOOT
Innovation
Neo Classical Theory
Research and Development
Competition from multinationals.

Market Concerntration
Divirsify
Intergrate

Stategic alliances

Mergers.