Alarming, damning, heartbreaking; Building associations lament industry plight

Speaking exclusively to API Magazine about the plight of the building industry, Jason Robertson, Director Housing and Construction, Master Builders Association Western Australia said a cost and cash flow crunch continues to devastate residential and commercial builders nationally.

Despite the lofty ambitions of the Federal Government, the latest dwelling approvals show new home construction is still falling well short of the homes needed to meet the country’s housing needs.

The latest data from the Australian Bureau of Statistics shows that for September total dwellings approved fell another 4.6 per cent, to chalk up a yearly decline of just over 20 per cent.

Approvals for total dwellings were mixed, with falls recorded in Western Australia (-11.0 per cent), New South Wales (-10.5 per cent), and Victoria (-8.9 per cent).

The recent news of three WA builders collapsing in a week, and a string of major collapses around the country, have come as a shock to many.

For a resilient sector to emerge from this current period of turmoil, Mr Robertson said builders still needed to navigate the ongoing and unprecedented skills shortages, price escalations, through to liquidated damages, all of which continue to place builders in very dangerous financial positions.

“Industry is still under enormous pressure in terms of capacity and these issues, if not resolved, will further impact negatively on housing supply and affordability.”

“This, coupled with the ongoing rate of insolvencies, will only seek to further erode industry’s capacity to deliver

“The insolvency figures for the sector are alarming, damning and heartbreaking.”

This nexus point comes at a time when the Federal Government has an ambitious national target to build 1.2 million new homes over five years, from 1 July 2024.

“There remain highly onerous contractual requirements in the commercial and residential sectors that have led to levels of risk being placed on builders that can have severe impacts on cash flows and affect business operations.”

Mr Robertson said the industry is still feeling the fallout of the last few years but said there were measures that could make the sector more stable.

He pointed out that Master Builders continues to call on government to address issues around contractual requirements to protect builders and consumers.

“Changes are needed in both the residential and commercial sectors with both procurement and contractual modelling.”

“Another major concern nationally with the potential to seriously impact and undermine industry capacity are the potentially catastrophic impacts of the Federal Government’s proposed industrial relations laws.

“If this legislation is enabled, in no uncertain terms it will mean more disputes, higher costs, lower productivity, along with massive negative impacts to our construction sector,

“It will also impact all residential builders, tradespersons and specialist contractors – all in return for higher construction costs and less new homes for Australians.

“This is in direct contradiction to other current government policy priorities.”

A lack of confidence in the sector is having a snowballing effect, as builders struggle, consumers shy away from new builds and the demand drops off causing more industry grief.

Between July 2022 and April 2023, 1,709 construction companies across the country entered administration, according to data from the Australian Security and Investments Commission.

“It is fair to say the current conditions have seen the levels of confidence within the public fall, the exact opposite of what is needed.

“It is never more important than now, for the public to understand as a sector, and importantly with builders at the apex, that it has suffered immensely.

“A constant challenge for industry is learning how the public can be well informed, both in terms of timeliness and fair, factual detailing, to protect the consumer and builder alike from unwarranted, negative, or even blatantly false commentary.

“There are, tragically, far too many examples of builders, many of whom are small businesses, that have seen the effects of the last few years result in the business folding after being forced to sell family homes and pay their tradies.

“Consumers and the public deserve factual reporting, and often it has been the case the plight and devastation of the builder has gone unreported.”

Queensland failing to meet housing targets

The latest data from the ABS record a 12-month total of only 34,060 new dwellings being approved, an 8 per cent drop and well short of the 48,000 homes needed each year to meet Queensland’s share of the national five-year target of 1.2 million homes.

Through 2022-23 the average time taken from commencement to completion has blown out for new houses, townhouses, and apartments.

The average build time for new apartments in Queensland has increased by six months to 26 months, while the average time from commencement to completion for new houses increased by one month to eight months.

Paul Bidwell, Chief Executive, Master Builders Queensland, on Tuesday (14 November) said it’s a tall order for the industry to deliver the housing targets and meet the needs of the massive construction program underway in Queensland while they continue to deal with delays and cost hikes.

“Back in 2016 we built 50,000 new homes in a year– so, it can be done but looking to the future, the current pipeline of new housing is well short of where we need to be,” he said.

Mr Bidwell said while Brisbane, Sunshine Coast and Wide Bay have recorded growth in dwelling approvals over the past three months, all regions in Queensland have reported negative growth over the past 12 months.

“There is some good news in the September numbers with a big spike in unit approvals over the month.

“Much of this can be attributed to tax concessions targeting projects stuck in the pipeline, such as Brisbane City Council’s decision to reduce infrastructure charges for certain unit developments.”

Reform the only option

Mr Robertson said that for the industry to thrive and businesses survive, at all levels of government there must be renewed efforts to work with industry in identifying, agreeing to, and implementing solutions.

“The importance of the building and construction sector to our economy is more than just considerable, the multiplier economic benefits that flow to other sectors are significant.

“The industry needs reforms to help rebuild long term sustainable capacity, along with a clear understanding that government and the public all have a part to play in helping the operating rhythm of a key sector for the benefit of all.”

It was a view echoed by his Queensland counterpart.

”The Queensland Government needs to work collaboratively with industry to ensure costs don’t rise further unnecessarily,” Mr Bidwell said.

“We’ll be looking for support from the government in Queensland’s 2024 budget, with initiatives like stamp duty relief for new builds, payroll tax relief for builders and grants to enable building businesses to implement business improvement software and homeowners to improve the energy efficiency of existing homes.

“Developers and government clients also need to adjust risk allocations and procurement strategies to meet the market.

“It is essential we keep building homes or the housing crisis will worsen.”