Metricon bounces back after tough times for home builders

The country’s largest home builder expects lower interest rates will drive demand next year and warns customers not to wait for costs to come back down.

Metricon said it handed keys over to 5319 customers in the 2024 financial year. Picture: Richard Walker

The country’s largest home builder, Metricon, is confident that the industry will come back strongly next year on the back of interest rate cuts after it reported a financial turnaround of nearly $80m for the 2024 financial year.

After appearing to teeter on the brink two years ago when it was squeezed by taking on thousands of fixed-price building contracts just as a cocktail of supply chain problems, bad weather and a pandemic era sales rush hit, Metricon says it is profitable again.

The company, which recapitalised its operations and also won crucial government contracts, generated earnings before interest, taxes, depreciation, and amortisation of $42.2m, a turnaround on the prior year’s loss of $33.5m.

Metricon chief executive Brad Duggan said the company was kicking off this financial year in a position of strength and confidence, representing a wider industry shift to a more positive future.

“After weathering a tumultuous period, our recent results indicate a strong future is on the horizon for the housing construction industry. The Australian housing construction industry is robust, and it is time to look at it more positively,” he said.

Metricon CEO Brad Duggan. Picture: Richard Walker

Metricon cited healthy customer demand, improved building efficiency and its supply chain efficiency for the turnaround.

The business is now riding a surge in demand from customers looking to build homes, with a lift in deposits nationally from 3303 in the 2023 financial year to 5279 in the 2024 financial year. Victoria’s metropolitan market had the biggest increase – from 1554 to 2330 – closely followed by Queensland, which was up from 706 to 1443.

Building times have also dropped over the last quarter, leading to an upturn in completed projects. Metricon said it handed keys over to 5319 customers in the 2024 financial year.

“We have doubled down on strengthening our relationships with the best suppliers in the market to ensure we uphold the great design, quality and efficiency that we are known for,” he said.

Mr Duggan said material costs had really stabilised as the company was supported by suppliers.

“There continues to be pressure on labour costs and we see that continuing,” he said.

He warned that home building prices would not come back to pre-pandemic levels and they could keep rising.

“I think if customers are waiting for there to be some dramatic cost down, I think they’re going to be disappointed,” he said.

Mr Duggan predicted a “large amount” of demand next year as buyers regained confidence as interest rates came down, which he warned could result in this acceleration of costs.

He said demand in Queensland and SA was well supported by government policy compared to Victoria, where high taxes now apply. The cost of living is also prompting some shifts.

“We are seeing a move towards more single storey homes across the country, and that really is a reflection of affordability,” he said.

Like many developers, the builder is finding that entry level buyers are being priced out. “There is good demand out there; it definitely isn’t among first-time buyers,” Mr Duggan said. “The demand is very much for our knockdown and rebuild business and our dual occupancy projects.”

Mr Duggan said the builder’s earlier results were the “reality of a business that has fixed-price contracts in an environment where costs escalated overnight by 40 per cent”. Metricon was committed to delivering the homes and, while that had been unprofitable, it was now back in control writing work that is cognisant of price increases.

He is now hopeful about more stability in the industry.

“We haven’t seen any significant issues emerge among the subcontractors,” Mr Duggan said. “They’re still quite busy in terms of levels of activity, particularly those in the finishing trades.”