It all depends on your perspective.
I don’t know if you’re as connected with the property industry as I am, but it is the best of times, it is the worst of times.
(hmmm. I should write a book.)
For people at the construction coal-face, it’s tough times. Builders are still going bust, and margins are wafer thin, if they’re there at all.
Some say their financial results are ‘rubbish’.
Scott Hutchinson, the executive chairman of privately owned Hutchinson Builders, slammed his company’s near-80 per cent slump in pretax profit to $6.3 million as a “completely rubbish” result, and said financial performance would only improve next year after completing loss-making projects.
He’s got a bunch of projects on the Gold Coast, but none of them are in the money:
“Nothing stacks up on Goldie at the moment,” Mr Hutchinson said. “Building prices are too high.”
All thanks the construction boom that the Morrison Government set in train during Covid – to be fair, governments had no idea what was coming, and they were trying to circle the wagons around big employment sectors. But the surge in demand saw an explosion in prices:
Booming demand was a problem for construction companies because they triggered a surge in costs in a sector with fixed capacity, Mr Hutchinson said on Tuesday.
“Just when you win a whole lot of work, if the whole world wins a whole lot of work you get caught with fixed prices and all your subcontractors raise their prices because they don’t have enough people,” he said.
“All of a sudden your costs go well above your contract value and you lose money.”
That’s a story repeated across the sector.
That’s the worst of times.
But for industry professionals at the sales coal-face – real estate agents and so on – it’s the best of time. Everyone is bullish, at least according to NAB’s Survey of Property Professionals:
The NAB survey found that confidence levels among property professionals continued to rise in the third quarter and there were heightened expectations for a housing market recovery in the next few years.
NAB’s one-year confidence measure lifted by 50 points in the third quarter, with the two-year measure stronger at 54 points. Both measures hit their highest levels in about two years and well above long-term average levels.
Expectations for house price growth in the next 12 months also improved across the country, except in the ACT where it fell by 1 per cent.
Property professionals reported very tight supply conditions in housing rental markets with a net 79 per cent assessing rental markets in their area as undersupplied.
Crushing it.
And ironically, pain in the construction sector is just going to make the outlook for the sales sector stronger, as the yawning gap between supply and demand just gets worse and worse, and prices go higher and higher.
“A Tale of Two Sectors” by Jon Giaan.
JG.