How Long Does It Takes To Build A House? Construction Times Are At A 10-year High
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How Long Does It Takes To Build A House? Construction Times Are At A 10-year High

High building materials costs and a labour shortage have combined to worsen Australia’s chronic housing undersupply

By Bronwyn Allen
Fri, Nov 10, 2023 11:48amGrey Clock 2 min

The average time it takes to build a new house in Australia has risen to its highest level in more than a decade, according to peak industry body Master Builders Australia. Average building times have blown out from 8.7 months in 2020-21 to 11.7 months in 2022-23 amid labour shortages, higher costs of materials, and a slew of building companies going bust.

The average length of time between approval and completion of townhouses has also expanded from 12.7 months in 2020-21 to 14.9 months today. Apartment building times hit a record high of 30.6 months in 2020-21 but this has now moderated to 28.8 months. Master Builders Australia CEO Denita Wawn said this was still far too long. “When our output of new apartments was at record levels back in 2015-16, it took just 21 months to complete a build,” she said.

The cost of building materials initially rose in the period immediately after COVID, with shipping costs exploding and then global inflation pushing prices even further. “Since the pandemic, building product prices have increased 33 percent,” Ms Wawn said. “While we are seeing a stabilisation of some building product prices primarily around steel, some products such as cement continue to escalate.”

Rising costs are a key reason why many small building companies have become insolvent. The fixed-price contracts they signed with some homeowners prior to the materials pricing surge meant many builders were forced to complete projects at a loss or on a very small margin.

But Ms Wawn said the industry’s challenges go far beyond temporary COVID-related impacts with a “formidable set of impediments in the form of planning delays, insufficient land release and red tape”. As a result, housing construction has not kept pace with Australia’s traditionally strong population growth, leading to a critical point today. Master Builders forecasts that new home starts will decline by 2.1 percent to about 170,100 in 2023-24, which it says is well below the 200,000 needed per year to meet population growth. Nerida Conisbee, the chief economist at Ray White, said the population rose by 500,000 people in 2022, which meant 200,000 new homes were needed but only 172,000 were built. 

Amid surprisingly strong property price growth in 2023 and a national rental crisis, the Federal Government has set a target of building 1.2 million homes over five years from 2024. However, many industry insiders question how this is going to get done. Ms Conisbee said the closest Australia has ever gone to building 1.2 million homes over five years was in 2015-20 when 1.05 million homes were built.

“This was a period in which we saw the biggest influx of Chinese capital ever recorded and there were thousands of apartments built across our CBDs and close to universities,” Ms Conisbee said. “The Chinese capital has mostly evaporated and there is nothing as significant to replace it. Ultimately, most of the money will come from households, whether in the form of people buying homes to live in or to invest in. The problem right now is high interest rates are preventing many from being able to buy new homes. Monetary policy is choking housing supply.”

Additionally, Ms Conisbee said an entrenched NIMBY (not in my backyard) attitude makes it tough for local councils to approve medium to high-density projects. “There continues to be a resistance to densities in our suburbs and this makes it difficult for town planners to get projects approved,” Ms Conisbee said. “Fortunately this is one area that the Government can more easily control and we have seen the announcement of many rezonings across Australia in recent months.”



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Thousands of Australian companies on the brink of going into administration as EOFY nears

Along with high inflation and weak consumer spending, there’s another key factor pushing a record number of businesses to the edge

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Fri, Jun 21, 2024 3 min

More than 10,000 companies are expected to have entered external administration by the end of the 2024 financial year, a level not seen for more than a decade. Data just released by the Australian Securities & Investments Commission (ASIC) shows 1,245 companies became insolvent in May, the highest monthly number this financial year. At present, a total of 9,988 businesses have gone bust in FY24 with data from June yet to be finalised.

Deloitte Access Economics Partner David Rumbens said the surge in business insolvencies this year was a “clear sign of economic distress”.

He commented: “[ASIC] predicts that by the end of the financial year, the number of companies entering external administration will likely exceed 10,000 – a level not seen since 2012-13, in the aftermath of the Global Financial Crisis (GFC).”

Mr Rumbens said the elements contributing to this year’s surge in insolvencies include high inflation and interest rates, weak consumer spending, and the commencement of more proactive tax debt collection activities by the Australian Taxation Office (ATO).

“One of the key factors contributing to this surge in insolvencies is the [ATO] pursuing debts that were previously put on hold during the COVID-19 pandemic,” he said.

Mr Rumbens cited ATO figures showing collectable debt rose 89 percent in the four years to June 2023. This has particularly impacted small businesses, which account for approximately 65 percent of the total debt owed at about $33 billion. “But more strictly enforced debt collection is coming at a time of tough economic conditions. High interest rates and cost-of-living pressures have weakened consumer spending, particularly in more discretionary components of spending.”

The construction sector has seen the highest number of insolvencies by far in FY24, mirroring the trend of FY23. Of the 9,988 insolvencies to date, 2,711 of them are in the building sector, which faces several challenges. These include a substantial lift in the cost of construction materials that is well above inflation and has made many fixed-price contracts signed within the past few years unprofitable. There is also a significant labour shortage that is delaying new home completions and new project starts, and also adding higher costs to projects.

“The construction sector has been hit particularly hard, with construction firms leading industry insolvencies in every quarter since mid-2021,” Mr Rumbens said. “They have accounted for approximately 25 percent of all insolvencies during this period. The residential construction sector is already facing a backlog of projects to complete as a result of skills and material shortages in recent years, and increased insolvencies in the sector may only exacerbate the problem of housing shortages.”

The ASIC data shows the next biggest industry affected is ‘other services’, which includes a broad range of personal care services such as hair, beauty, dietary, and death care services. The sector has seen 939 insolvencies in FY24. Retail trade is next with 687 insolvencies, followed by professional, scientific and technical services with 585 insolvencies.

“The food & accommodation sector has also experienced a wave of insolvencies. High input costs, worker shortages, and weak consumer sentiment have put pressure on businesses. Specifically, in March, cafés, restaurants, and takeaway businesses accounted for 5.5 percent of total business insolvencies, the highest proportion in the last three years.”

Mr Rumbens pointed out that while the number of insolvencies was high, it represents a lower share of the business sector at 0.33 percent than it did in FY13 when it was 0.53 percent. “This reflects the increase of registered companies in Australia, which has risen from just over two million to 3.3 million since 2012-13. Even so, the continued lift in insolvencies since 2021 highlights the difficult conditions many businesses face at present.”

 

 

MOST POPULAR
11 ACRES ROAD, KELLYVILLE, NSW

This stylish family home combines a classic palette and finishes with a flexible floorplan

35 North Street Windsor

Just 55 minutes from Sydney, make this your creative getaway located in the majestic Hawkesbury region.

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