Troubles for the construction sector are a long way from over.
The housing shortage is going to get worse. A lot worse.
I can guarantee it.
You can see it in the numbers already.
The population is growing strongly thanks to record immigration levels – levels that are blowing the already super-charged projections in the budget out the water.
But at the same time, construction levels are plummeting.
Data on dwelling approvals, loans for the building or purchase of new dwellings, and new home sales have all nose-dived, suggesting that Australia will build fewer homes rather than more in coming years.
That’s not what we want.
But that’s what we’ve got.
Last month, News Corp reported that Australia is running desperately short of builders, which has meant that housing projects have remained dormant:
“Billions of dollars worth of shovel-ready projects across South East Queensland are without a builder and developers are rapidly losing money on projects”.
Exclusive research by PRD reveals more than 40 per cent of all 196 residential projects worth over $10 million due to start construction in South East Queensland between January 2022 and 2024 do not have an explicit builder or design builder assigned”.
“If we can’t fully rely on projects that already have a builder going ahead, due to labour and material issues, higher construction costs, and delays in delivery timelines; how can we rely on our housing supply actually increasing?”, PRD chief economist Diaswati Mardiasmo said.
“Even if developers can get builders, the costs of building are such that developments aren’t stacking up”, Master Builders Queensland CEO Paul Bidwell said.
Construction companies are going bust at an alarming rate. New figures from the Australian Securities & Investment Commission (ASIC) have revealed that external administration appointments in the construction sector jumped to 660 in the new financial year to 10 September, up 38% on the same period in 2022.
We all remember the explosion in the price of construction materials:
“There is still a hangover from the previous few years when builders were hit by the rising cost of materials and labour on fixed-price contracts”, Master Builders Queensland chief executive Paul Bidwell said.
“These issues caught out a lot of builders and they just did not have the resources to keep going”.
“The price to build a home in Brisbane went up 42 per cent in the three years to the end of 2022 but has only increased 10 per cent since then”, Mr Bidwell said.
Think about that for a sec. If the price of a new-build goes up 42%, then what happens to the price of existing housing, a direct competitor? It goes up too.
Construction cost inflation is easing, but prices aren’t coming down:
But just as the price of materials is easing, the cost of inflation is going up:
“The construction sector, in particular, is very reliant on insurance, and while price growth momentum in building materials is slowing, rising insurance premiums will be the next headache the industry will face”, CreditorWatch chief economist Anneke Thompson said.
This is ugly.
And it means that there is zero chance of building the Albanese government’s aspiration housing target.
We’ll be lucky if we even come close.
Which means the housing shortage gets worse.
And house prices keep going up.
JG.
peter says
Agreed , increasing population without increasing housing is a recipe for economic disaster . Supply & demand will dictate the outcome . Those who want to enter the property market will need to lower their expectations rather than constantly bleating about the cost of housing .