Some scary numbers on the collapse in construction.
Let’s have a bit of a look at the construction numbers, because they’re actually telling a bit of a scary story.
Well, scary depending on where you sit. As a man with a substantial property portfolio, I’m going to do amazingly well out of it.
But I’m self-aware enough to realise that maybe it’s not the best outcome for the country.
So the long and short of it is that housing construction is collapsing, just as we’re ramping up demand, leaving us with a chronic(er) housing shortage.
The latest federal budget reckons that Australia’s population will increase by a record 2.18 million people over the five years to 2026-27, driven by record net overseas migration of 1.5 million people.
This population surge is landing here just as housing construction goes into freefall.
Completions are holding up for now, but the trend is clearly down, and the leading indicators all look terrible.
According to the Australian Bureau of Statistics (ABS), the number of loans issued for the purchase or construction of a new home plunged to a record low in April, down 74% from the January 2021 peak:
Let that sink in. The lowest levels on record. Just as population growth hits the highest levels on record.
And there’s no end in sight here.
Treasury secretary Steven Kennedy warned Senate Estimates this month that the downturn in dwelling approvals will continue until 2025, with investment in new dwellings forecast to contract by 2.5% this year and a further 3.5% in 2023‑24 and 1.5% in 2024‑25.
And the Housing Industry Association’s (HIA) new home sales series was running 25% below pre-pandemic levels in May; albeit has rebounded 4.4% over the quarter:
HIA Senior Economist Tom Devitt warned that “the RBA’s rate increases will continue to hold down new sales and cause further cancellations as finance becomes unobtainable for an increasing number of buyers”.
In turn, new home sales would continue to “contract for at least the next 12 months to its lowest level in more than a decade”.
The last 18 months has already seen thousands of home building companies collapse, encompassing small players to industry titans like Porter Davis Homes, which left 1700 homes under construction across Victoria and Queensland in limbo.
So even if financial conditions were favourable, the construction industry is getting hollowed out – it doesn’t have the capacity to meet demand even if it wanted to.
And the mood in the industry is sombre.
Late last week, Lendlease Australia CEO Dale Connor warned that more building and construction companies will collapse, saying “there are days where I feel like we’re doomed”.
“Unfortunately, I think there’s going to be more organisations that perhaps are going to go broke before it gets better”, Connor said.
Put all that together and what have you got.
The mother of all housing shortages, that’s what.
And what happens in housing shortages.
Prices shot northward.
With a rocket.
JG.
ROBERT kIESANOWSKI says
JG Thank you for the blog on a well known reality by many, many tradies who have known the problem for a long time back (years back). We (the survivers) are constantly called on to fill in were there is no one skilled sufficiently to get the job done. There is a limit to how much we can do. Government can not help as they them selves are incompetent. Investers are scrambling to secure their retirment funds with enough to live on. They to are finding the extream problem of finding good tradies at a reasonable price. As a result existing assets (Real estate) are a top end choice for passive income envestment.
I have a solution: I my self was trained by imigrant Trades men in a time of a shortage of skilled workers. They came from England, I remember at least 4 one each from Scotland, Wales, Ireland and Isle o White with govt assist travel and housing costs. Their housing was of the poorest quality.
So I see we must target the imigration of basic skilled persons ( “basic” NOT so called paper skilled from some clandestine university) that are allowed to also bring their imediate family, who can imediatly be granted the same privilages as an Aussie and become citizens after 3 to 4 years. The imigrant tradie will agree to such a plan as an agreement with the Australian people. and binding for a period of time.
We have no time left to wait 4 to 5 years to train the new generation. Sadly we must do that as well.
It is a deep hole we have dug.