Home builds in jeopardy after productivity falls off a cliff

Jarrod Brown
By Jarrod Brown
4 Min Read

There doesn’t seem to be an end in sight for the nation’s housing woes as construction productivity across the industry takes a nosedive.

New data released yesterday by the Australian Bureau of Statistics (ABS) showed an increase in the annual inflation rate to 3.6 per cent in April, and all three sectors of the building and construction industry reporting a significant drop in output.

In the first quarter of the year, residential construction dropped by 1.2 per cent, civil construction by  2.1 per cent, and non-residential building a concerning 7 per cent.

Master Builders Australia’s Chief Economist Shane Garrett said these numbers should have alarm bells ringing in the Australian government, especially with the first batch of Albanese’s 1.2 million Housing Accord home builds only a month away. 

“Housing costs contributed significantly to April’s poor inflation result,” said Mr Garrett. “Over the past year, rents have risen by 7.5 per cent.

“High rental inflation is a direct result of years of underbuilding on the higher density side of the market, caused by a drastic lengthening in the build times for new homes, labour and material shortages as well as excessive homebuyer taxation.

“Labour shortages are the biggest constraint on building and construction activity, and we are also facing unfavourable changes on the Industrial Relations front as well as a new wave of regulation. Policies must change to reflect the urgency of this.”

According to Master Builders’ Chief Executive Denita Wawn, these figures are the lowest residential construction has seen in nearly two years and offer no reprieve to the housing crisis that has left thousands of Aussie families scrambling for a roof over their heads. 

It might be worse than we think

But the bad news doesn’t end there. While the latest stats might paint a bleak picture for prospective home buyers and builders alike, recent market analysis has revealed the housing pipeline might be in more trouble than we think.

According to figures from accounting firm KPMG, almost 40,000 homes of homes that were approved for construction across the country are actually sitting in limbo, unable to begin builds thanks to high interest rates and rising costs leaving developers wallets shortchanged. 

Urban economist Terry Rawnsley, who conducted the analysis, said this was far outside industry norms and urged the industry to get worrying market factors responsible for “stalling the pipeline of new builds” under control.

“Sometimes people also forget that interest rates also impact on the developer side as well – it means they can’t borrow as much to get the projects up and running,” Rawnsley told the Guardian earlier this week. 

The report found that Sydney and Melbourne were responsible for almost half of all “approved but not yet commenced” projects across the country, with 80 per cent of these stalled projects being townhouses and apartments.

Calling the construction industry’s turbulent start to 2024 a “canary down the economic coal mine” for Australia, Ms Wawn said the government should be preparing for what’s to come. 

“During 2023, civil construction became one of the main drivers of economic growth in Australia; this is now in reverse jeopardises economic growth,” she said.

“If we are going to undo decades of under-building and resolve this housing crisis, we need to change the economic environment to encourage investment across all sectors of the industry by reducing the cost of construction work, reducing build times, reducing planning delays and slow approval processes.”

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Jarrod Brown combines his background in journalism, copywriting and digital marketing with a lifelong passion for storytelling. He has a strong passion for new and emerging consumer technology within the building sector. He lives on the Sunshine Coast - usually found glued to the deck of a surfboard.