A return to form is on the horizon for the nation’s construction industry, according to the latest forecast figures released by Master Builder’s Australia (MBA).

MBA’s forecasts, across three major sectors of the construction industry, paints a generally positive growth path in the coming three years for engineering, residential and non-residential building.

While the forecasts predict a positive growth path for the industry, the current economic climate presents many significant headwinds that may become impediments to the timing and strength of recovery in the forecast period, according to the report.

Peter Jones, Chief Economist for Master Builders Australia said the return to more positive conditions for the industry implicit in the forecasts signals light at end of a very long tunnel for the residential and commercial building sectors, but does not herald a return to boom era levels.

Residential construction is set to ‘improve strongly’ according to the report, but will start from a low base over the next three years.

The value of residential building work done, in real terms, is forecast to grow from $46.2 billion in 2012-13 to $60.9 billion in 2015-16.

Non-Residential Building work done is predicted to decline further in real terms in 2012-13 followed by modest growth in the following years. Growth is expected to be driven by commercial and industrial building sectors, contrasting with weakness in social and institutional sectors and education related building.

For Non-Residential Building, strongest performing states are forecast to be New South Wales, Queensland and Victoria, with industrial, retail and office building leading the way.

“The key headwinds and risks are poor cash flows, low margins and tough lending criteria. Investor confidence also remains low reflecting current economic conditions,” Mr Jones said.

The Engineering Construction sector reached phenomenal heights during the resources investment boom. Despite signs the investment phase is beginning to peak, Engineering Construction activity is expected to remain strong.

Activity is forecast to increase 5.4 per cent in real terms to $122.1 billion in 2012-13 before falling back 12 per cent to over the following three years to a level of $108.0 billion.

“After very strong growth, Engineering Construction activity in the Northern Territory, Western Australia and Queensland are forecast to fall back, albeit remaining at extremely high levels in an historical context. Victoria and Tasmania look set to benefit from stronger infrastructure spending,” Mr Jones said.