Australia / Analyst Insights
High-density housing trends have benefited construction companies

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by William McGregor
Aug 30 2016

Many significant events have influenced the global economy over the last year. Some of these events have affected the Australian economy as a whole, and some have hampered growth in certain industries. IBISWorld compiles an annual list of Australia’s Top 500 Private Companies, in partnership with the Australian Financial Review, which ranks companies by total revenue. The Top 500 List helps determine trends in the Australian economy.

Australian residential home builders have endured difficult trading conditions over the past five years. Volatile dwelling commencement numbers and shifts in consumer demand have reshaped the industry. As a result, IBISWorld expects that revenue for the house construction industry contracted by an annualised 1.0% over the five years through 2015-16. Residential builders are attempting to counter this trend, implementing growth strategies focusing on the construction of multi-unit apartments and townhouses. This reflects consumer housing preferences shifting towards high-density living.

BGC (Australia) Pty Ltd, a commercial and residential builder that features in IBISWorld’s 2016 Top 500 Private Companies List, has traditionally focused on detached house construction. Despite revenue contracting for the overall house construction industry, BGC’s revenue relating to house construction has grown by an annualised 8.3% over the five years through 2015-16. It is now the second largest player in the market, at an estimated 2.5% of industry revenue. BGC has successfully positioned itself as one of Australia’s largest residential builders, ranking highest on the Housing Industry Association’s list of home builder dwelling commencements in 2014-15. BGC differentiates itself from rivals by catering to first home buyers through to prestige buyers. However, BGC’s total revenue is expected to decline over 2015-16 due to its primary focus on the Western Australian housing market, which is struggling in the absence of the resources boom. Despite this, BGC remains the largest privately owned residential builder in Australia and it has begun to focus on multi-unit apartment and townhouse construction and investment. The company is doing this through BGC Construction, with the construction of Elevation Apartments, and BGC Property, which invests in residential apartment blocks and city buildings.


In contrast with BGC’s position as a traditional house construction company, Meriton Apartments Pty Ltd is a high-density residential builder specialising in luxury apartments. The company operates through a diverse portfolio of businesses including Meriton Apartments, Meriton Serviced Apartments, Karimbla Construction Services, and Meriton Property Management. Meriton’s long-term strategy has been to diversify its operations, providing serviced apartments and catering to new customer bases by providing a Chinese language-based website. These strategies have seen Meriton’s revenue specific to the multi-unit apartment and townhouse construction industry increase by an annualised 18.7% over the five years through 2015-16. This growth has helped Meriton rise to secure a higher position among Australia’s Top 500 Private Companies compared with last year.

While difficult economic conditions have obstructed growth among residential builders, IBISWorld expects the short-term situation to improve as high-density living trends increase. Meriton has demonstrated that opportunities exist for residential builders to grow by focusing on constructing high-density residences and diversifying services. BGC has shown that long-term strategic growth is achievable for residential builders that diversify their operations away from residential house building, and towards constructing residential apartments, and investing in townhouses and apartment blocks. IBISWorld expects both construction companies to continue pursuing their current long-term strategies, maintaining their positions among Australia’s largest private companies. As a result, their success will most likely result in competitors emulating their growth strategies over the next five years.

IBISWorld’s Top 500 Private Companies list will be published in the Australian Financial Review in September. The Top 500 list promotes Australian ownership, and demonstrates the vital part privately owned and unlisted public companies play in the Australian economy.


Relevant companies:

BGC (Australia) Pty Ltd

Meriton Apartments Pty Ltd