Promises from the Top

In the last week of October my wife and I shared a lazy Sunday breakfast with some old friends. As we hadn’t seen each other for a while the essential topics were quickly covered: family, mutual friends and work.

One of the couple is a doctor, balancing his days with time in both the private and public sector, in which I have suggested he has an oversized influence on government policy and tactlessly encouraged him to “hurry up” with the long-promised construction of the Melton hospital. While he laughed off such a notion, he confirmed the project is advancing beyond the cries of long-suffering families in Melbourne’s north-west. Of course, as much as I know how important this project is for the existing residents of Melbourne’s most significant growth corridor, I realise a green light will also promote housing starts. Good for our customers and good for Bowens!

Once we get past the lighthearted banter, I am reminded of the differences in what we do. He goes to work and literally saves lives, every day. I go to work with the goal of selling more timber, hardware and trusses. Despite my comparatively inadequate purpose, he still checks in on how Bowens and my job are progressing. At our recent catch-up, he leapt straight to where so many others also land. “You guys must be killing it at the moment?”

“He goes to work and literally saves lives, every day. I go to work with the goal of selling more timber, hardware and trusses.”

It is an interesting reflection. While I spend much of my time preparing for the worst, those from outside the industry are guided by media reports, leading to a prevailing belief in blue sky. Historically low vacancy rates, surging immigration and a scarcity of housing. They watch the news, they read the headlines. The industry MUST be booming.

To this end, our Prime Minister recently made his position crystal clear. On 19 September he declared, “ … in partnership (here) with the Victorian Government … the $2 billion Social Housing Accelerator fund enables projects to happen, fully federally funded. We’re partnering with Victoria on the $1.7 billion we extended for just the current financial year, extending the Commonwealth State Housing Agreement. There’s the $2 billion we’ve allocated for community housing. And last week, an additional $1 billion as well, being made available through our housing infrastructure facility, so that community housing organisations can get loans and get support to make sure that additional housing is built.” (Press conference transcript, the Prime Minister’s Office)

By anyone’s measure it’s a lot of dollars to throw at the housing industry. Why wouldn’t ‘outsiders’ assume builders and suppliers are flourishing?

“By anyone’s measure it’s a lot of dollars to throw at the housing industry. Why wouldn’t ‘outsiders’ assume builders and suppliers are flourishing?”

At the same press conference Mr Andrews, in one of his last announcements as Victoria’s Premier, confirmed the state’s intent. “At last, a partnership on more housing for people who need it most. At last, a Prime Minister who, from my point of view, knows where Victoria is and knows how important housing is for every single Victorian family. More housing supply means lower prices. It also means that you’ve got that absolute essential, a roof over your head to then build a life yourself, to reach your full potential, to play your part, to be a part of our state’s successful future.”

To the question of when? Mr Andrews went on to say, “ … no one should be getting any points for admiring the housing problem. We should get on and build more houses. And that’s exactly what we intend to do.”

Victoria’s Housing Statement is clear. “It’s a simple proposition: build more homes, and they’ll be more affordable. But the Government can’t fix the problem alone. We’ll do it in an Affordability Partnership with industry. We’ll foster the conditions needed to stimulate investment and build high-quality homes quickly in the places where Victorians want to live – and the private market will build more social and affordable housing for the Victorians who need it most.” (read more here).

It is all there in black and white. Your friends and mine are being made aware of the investment to better house the people of Victoria and the builders of Victoria have been invited to make it happen. This should only be a good thing for our industry, shouldn’t it? So, why does the current reality read so poorly for those living closer to the action?

The HIA’s Victorian President opened his October report with the following statement: 

“The bad economic news for our industry continues. While there is hope we are at the end, or at least close to the end of the interest rate increases, consumer confidence continues to be poor. The slowdown in new work is causing stress for much of our industry.”

While Bowens is not seeing the same volume of customers under stress as six months ago, the first quarter of the 2024 financial year has continued to be a difficult time for many. Using our internal measures as a guide, the number of customers we define as ‘struggling’ easily exceeds the period leading into the Covid-19 years. Highlighting this fact, the external partner we use for debtor insurance is being as tough as we have seen them over our twenty-five year relationship.

Our State and Federal Governments have some wonderful plans, however they must acknowledge current realities. According to ABS data, since 2012 average wages have risen about 30 per cent, while existing dwelling prices across Australia’s capital cities have jumped close to 90 per cent and in the past year alone, the cost of a new build in Victoria is up 23.3 per cent and for land, a further 18 per cent. The result: detached home building over the next two years is predicted to be lower than any twelve month period since 2012/13. (2023 HIA Construction Outlook, 20 September, 2023)

“Our State and Federal Governments have some wonderful plans, however they must acknowledge current realities.”

On 28 October, 2023, The Age reported site starts for houses, townhouses and flats in the quarter ending 30 June were the poorest they have been since 2009. And, relative to the state’s population, residential building is at its lowest level since the early 1990’s.

“On 28 October, 2023, The Age reported site starts for houses, townhouses and flats in the quarter ending 30 June were the poorest they have been since 2009.”

Incredibly, despite the bad news, Bowens’ numbers point to the industry’s resilience. Our activity was better in September and October than any of the four months prior. There are enough good stories from our customers to raise the spirits of those who are experiencing more trying times.

“Incredibly, despite the bad news, Bowens’ numbers point to the industry’s resilience.”

Whether the past year has been tough or just okay, there is little doubt better days lie ahead – our (previous) Premier and Prime Minister have promised as much. At the same time, some significant obstructions cannot be ignored. I hope they have a solution for higher interest rates, a shortage of building trades, planning impediments, industry taxes and other hurdles, such as changes to the NCC. Bringing a dream to life requires more than a robust press conference and the goodwill of our friends.