The Way I See It

As the industry prepares for another Christmas and a few weeks of deserved rest, I have been impatiently searching for prognostications on the year ahead. Will our construction industry grow? If the answer is ‘yes’, the next question is ‘why’? Interest rates appear to be stubbornly unmoving and while inflation has slowed, prices are holding at a higher level. Put simply, life is expensive and building homes or creating new living spaces is beyond a lot of the population. Something needs to give for the market to recover its verve. 

According to data published by the Australian Bureau of Statistics in mid-November, the cost of building a home in Victoria jumped more than 25 per cent over the past four years. At first blush, this number feels conservative. Of course, the price of land is the other consideration. In the UDIA’s ‘State of the Land Report 2024’, annual median greenfield prices have grown 33 per cent since 2019 and 243 per cent over the past decade.  

Following the State Government’s Housing statement in 2023, recent announcements have strengthened a perception of them doing more to house a greater number of Victorians. There has been a lot to take in as Jacinta Allan sets her sights on Victoria building more homes. 

IF we could free ourselves of the justifiable cynicism, the Government’s recent statements provide plenty of hope. Click on the following link to view the Premier’s announcement from 23 October – https://www.premier.vic.gov.au/sites/default/files/2024-10/241023-A-Decade%27s-Worth-Of-New-Family-Homes-And-Backyards.pdf. Some of the points made: 

• The government has unlocked “the longest-ever pipeline of new greenfield land supply – 10 years of new family homes and backyards”. According to the Premier’s office, the move would guarantee timelines for 27 additional greenfield areas, primarily across Melbourne’s outer south-east, north and west; a commitment to provide the space and complete the planning necessary to deliver 180,000 new homes over the decade. 

• Improvements to the planning system so builders can “get on with building”. From 1 January 2025, the Victorian Planning Authority will be integrated with the Department of Transport and Planning. (There was nothing in the statement to explain how this will help) 

• The Government will also offer a dedicated concierge service to work with councils and industry to identify, intervene and fix the issues preventing zoned land from being developed. 

In other government announcements, Victoria’s Building Commission will be replaced by a new, “more powerful watchdog” – the Building & Plumbing Commission. Under the one agency, the new body will deal with regulation, building insurance and dispute resolution. 

With only our recent history to compare, it all seems too good to be true. Even so, the promises continue. Major cuts to stamp duty for off-the-plan apartments, units and townhouses for 12 months, starting 21 October 2024. Also, the government has initiated significant planning reforms to make it easier for homeowners to subdivide. Their promise includes 10-day subdivisions (down from 60 days and often longer), criteria-based planning permit exemptions, or no requirement for a planning permit at all!

One of the more controversial announcements has been the expansion of the government’s Activity Centre program for higher-density housing in 50 zones surrounding Melbourne, based around public transport hubs. The first 25 have been decided, including Brighton, Hampton, Malvern and Toorak. The government estimated the zones would lead to 300,000 more homes in metropolitan areas by 2051. 

Back in the real world, I can only work with what I know. And from what I have seen across 2024, a heavy proportion of our customers have continued to do it tough. Sadly, I cannot think of another period in my 30+ years with Bowens when I have heard so many builders talk about exiting the industry.  

Each December I write a letter to the Bowens team. See an excerpt from my effort this year. I hope it accurately reflects the feelings of our industry: 

“ … following three incredibly difficult years for our customers and all Victorians, the health of our state’s construction industry has begun to normalise. While builders continue to battle many headwinds, they have mostly right sized their businesses, are building more profitable jobs and construction times are reducing to where they were pre-Covid. While this is encouraging for Bowens, the improving financial stability of our builders has not necessarily led to a year of prosperity. From the first days of January, it was clear site construction had slowed. In the months since, the industry’s published data has only confirmed a significant deceleration. The cocktail of increasing interest rates, rising input costs and a continuing shortage of trades has led to Victoria building less dwellings in 2024 than any other year in the past decade. With fewer jobs to build, the competitive pressure on Bowens has ramped up appreciably. We have worked very hard to gain a greater share from an evaporating pool … ” 

Of course, there is still a healthy cross-section of builders doing well enough to give the industry some encouragement. Listening to our sales team, despite the challenging economy and other obstructions they are required to traverse, just as many of our customers have solid bookings across the next twelve months as those who don’t. From what I have discerned, our ‘smaller’ builders and renovation specialists are more likely to maintain a healthy outlook than those operating in the volume builder space. For our commercial customers, it appears jobs need to be taken far and wide to keep their wheels turning. 

For those readers of the Builders Bulletin who are experiencing tougher times, you have our empathy. I sincerely hope you are able to put your concerns aside, even for just a week or two, to experience a restful summer break. We (me included) spend a lot of time bemoaning the state of our politics, the economy and life in these times, probably a bit too much. As my father often says, we are lucky to call Australia our home. When I look at the ails confronting most of the world, I think he is right – again. 

Merry Christmas. I look forward to seeing you in the New Year, positive and refreshed.