Housing investment slump no surprise to stretched Queensland industry

Queensland’s building industry says the fall in dwelling investment in this week’s state budget comes after rising construction costs priced out many developers.

Dwelling investment in Queensland has slumped. Picture: Matt Loxton

Queensland’s building industry is not surprised that dwelling investment has slumped over the past 12 months as construction costs price many developers out of the market.

Last year, the state government tipped a 5.5 per cent rebound in housing investment as builders worked through the balance of worked backed by HomeBuilder pandemic stimulus.

Tuesday’s budget revealed that, in reality, investment shrunk by 2.5 per cent.

The decline was blamed on a slump in spending on home renovations and new houses, but “strong growth” in the units and apartments market was expected to continue adding to the overall housing supply.

But Housing Industry Association Queensland director Mike Roberts rejected the government claim, saying no apartments can get out of the ground because of construction costs and labour shortages.

“We’re not seeing investment in the apartment market because no one can get a project to commercially stack up and I believe that that’s going to get worse before it gets better,” he said.

“No one in southeast Queensland is taking on a high-rise residential tower at the moment.”

The fastest rate rise in a generation and cost-of-living pressures have made homeowners more reluctant to take on large amounts of expensive debt, he said.

Tradespeople in some specialities – particularly end-of-job workers like tilers and painters – are still in short supply.

Developer Don O'Rorke from Consolidated Properties Group. Picture David Clark

Veteran developer Don O’Rorke, founder of Consolidated Properties, told The Australian that luxury units designed for downsizers were the only product type viable in the current market.

“It’s not possible to produce an apartment for under a sale price of $15,000 per square metre,” Mr O’Rorke said.

“I’m not surprised (dwelling investment has fallen), but I’m disappointed because particularly in southeast Queensland, we have such high population growth. We certainly have the demand but we are unable to fulfil the supply in that middle to lower end apartment market.

“I can’t see any immediate sol­utions. In aggregate, construction costs are still going up. All we can do is wait for the ability of the market to pay the higher prices to catch up.”

He also noted that townhouses were viable but price points had shifted up about 30 per cent compared to pre-Covid.

Treasurer Cameron Dick on Tuesday said the cost of construction, including civil works, had risen by more than 30 per cent in three years, 15-fold higher than the previous ­period.

The pipeline of new housing has been in the doldrums nationally for the past 18 months, proving the quietest period for approvals in more than a decade, but Mr Roberts said home builders were seeing “encouraging” signs in the market that new home buyers were returning.