State gives millions to builders but industry to demand more assistance

Western Australia’s peak industry body for builders is this week holding talks with the State Government in a bid to have it increase its support that has already seen $13 million worth of relief payments paid to 13 building companies.

Master Builders Association of WA (MBA WA) will this week engage in discussions to introduce further reforms to assist builders struggling to overcome the contractual risks that come with construction costs rising after contracts are signed.

The Head Contractor Relief Scheme provides financial relief to head contractors that entered into fixed priced contracts on Department of Finance and Department of Communities projects prior to sudden increases in market costs.

The Department of Communities this week confirmed it has paid out just over $4 million across 137 residential construction contracts as part of a builder support package. The contracts are spread across 13 builders.

In addition to the housing projects undertaken by that department, a further $9 million has been paid to builders completing Department of Finance projects, including public services such as healthcare facilities, schools and police stations.

There are a very small percentage of builders who are flaunting the system and at this stage they are getting away with it.

- Jason Robertson, Director Housing and Construction, MBA WA

Speaking to API Magazine, Jason Robertson, Director Housing and Construction, MBA WA, revealed that further talks were set to take place this week to improve government procurement procedures and to shift risk away from already embattled builders within the private residential sector.

“At a time when revenues have technically increased, building companies are posting record losses and insolvencies and the sector is hurting immensely.

“Industry is seeing more and more people leave the sector, from not only tradespersons and other workers, but from builders themselves.

“At a point in time where there is a housing supply crisis, we are witnessing builders consciously choosing to look at winding their businesses up, exiting the industry never to return.

“Fundamental to seeing the above take effect, is ensuring reforms are enabled to provide for a building practitioner and contractor registration framework that gives both the public and industry a suitable level of protection and equally legislated measures for redress where required,” Mr Robertson said.

MBA WA has identified and lobbied for changes to registration requirements to improve building standards and consumer confidence in the sector.

WA Finance Minister, Sue Ellery, said delays to building projects originated from supply chain disruptions following the pandemic, but added that these are showing signs of tapering.

“This Government understands the unforeseeable changes in market conditions has been challenging for the building and construction industry, which is why we responded quickly by introducing a range of measures to assist head contractors working on Government projects.”

Disreputable builders causing industry damage

Dodgy builders employing unqualified building site labour in a quest to overcome labour shortages are the exception but do continue to damage the industry and consumers.

WA’s building regulations have been branded the weakest in the nation.

The government’s industry watchdog, the Building and Energy division of the Department of Mines, Industry Regulation and Safety, contends with more than 1,000 complaints a year from dissatisfied home buyers.

The division has 10 investigators to weed out and tackle all the illegalities across the state. It also has a team of 15 who carry out checks, audits and inspections to identify trends and improve compliance across the building industry.

“There are a very small percentage of builders who are flaunting the system and at this stage they are getting away with it,” Mr Robertson said.

“Our reform recommendations include improved measures for overarching control on approving builder registrations, holding builders accountable, disciplining and or closing disreputable builders.

“We see this as an opportunity for our industry to regain consumer confidence, build a better workforce and hold disreputable companies accountable for their fraudulent behaviour, that sadly tarnish the reputations of the majority of good, reputable builders.”

The Master Builders agenda with the Premiers Office will include suggested reforms in this area.

Building outlook tepid for 2024

Building approvals in Western Australia are showing signs of rebounding from the 40-year lows seen just a few months ago.

Seasonally adjusted growth in private sector house approvals was strongest in Western Australia to the end of October (the most recent data available), which saw an 11.7 per cent rebound after a 9.9 per cent fall in September, to be at the highest level since August 2022.

But the most recent report from the Western Australian Treasury Corporation points out these gains may be short-lived.

“Dwelling approvals picked up in October, however the trend remains subdued, and suggests that once the current pipeline of work is completed there is not much coming through,” their economic analysis noted.

“While high levels of immigration are supporting the strong demand for housing, high house prices and a sharp increase in interest rates are a barrier to many getting into the market, and rentals remain in very short supply.”

Tanya Steinbeck, UDIA WA, CEO, said Western Australia, like the rest of the country, is in the midst of a housing crisis.

“The building stimulus measures introduced in early 2020 served as a catalyst for a significant spike in demand for new home builds in WA that the industry simply wasn’t ready for - the knock on impacts of that, or the unintended consequences, are still being felt today,” Ms Steinbeck told API Magazine.

“UDIA is supportive of the measures that the State Government has taken to support the industry and get more homes ‘on the ground’.” 

Looking ahead to 2024, she said that as the state heads into a state election campaign, the focus needs to squarely remain on addressing the housing supply crisis.

“Throughout the pandemic and well into 2023 we have seen demand for new housing continue to escalate and, unfortunately, supply has not been able to effectively keep up with that demand.

“The property industry has been impacted by the perfect storm of increased buyer demand coupled with limited access to skilled workers, materials shortages and rapid cost escalations and other issues related to pandemic restrictions that have had dire consequences.”

MBA WA’s Mr Robertson said that for the residential sector, there are signs of improvement, albeit somewhat gradual.

“Construction lending for owner occupiers has fallen, but overall, there has been an uptick in the value of construction loans for investors,” he said.

“Building approvals remain at a low level, however, in context, the number of building approvals are expected to pick up in line with increased land sales.

“To provide some further context, new home building starts shot up to 23,340 during 2020-21, following several years of lower-than-average activity levels.

“The return to reality was somewhat sobering with it estimated that work started on just 14,744 new homes across WA during 2022-23.

“That is very likely to represent a low point and we will be moving upwards from here, although slowly at first.”

He added that for the multi-unit and apartment side, data on approvals for multi-residential suggested a downwards trend, potentially due to buyers’ preference for homes or detached dwellings rather than multi-residential buildings.