Albanese government must exploit wealthy Aussies investing in real estate, helping builders

Rich Australians are coming back home, investing in real estate and buoying struggling builders. The government simply must not waste this opportunity.

Money is flowing back in to local real estate. Picture: NewsWire

The prospect of much lower interest rates has transformed Australian markets. What has not been factored in is the stimulus combination of Australian billionaires bringing their money home and the Albanese spending program.

We are going to see a rise in building and construction, which will test our skills base.

In the early months of 2025, a number of Australian billionaires with large investments in the US began to feel very nervous about what was happening in both the US and Europe. They were well ahead of the Moody’s US rating downgrade.

Many have now sold and brought home much of their overseas wealth and decided to invest in Australian real estate developments.

But, the 2025 investment strategies are different from the high-risk-taking strategies that build up the wealth. Instead, they are looking to preserve their wealth in this period of global uncertainty.

They are undertaking Australian real estate developments, including apartments for rent, which do not carry high yields. They are making a long-term investment in much the same way as overseas property investors built office towers in the past century.

Those towers were also built on low yields, but later benefited as governments and large corporations created massive central offices. The office block values increased markedly.

Now, the need for office accommodation has declined along with the value of the buildings. Most of the original developers moved on and took their profits.

Meanwhile, the demand for rental residential accommodation is increasing at a time when individual landlords are being forced out of the market by high taxes and legislated restrictions and rental rules which are hard for individuals to manage.

As the long-term investors did in the previous century with office blocks, the rich Australians of 2025 are catering for a new demand and in some cases, where large properties are available, they plan non-residential developments.

It is not about quick sales, but rather establishing long-term, low-yielding stakes in real estate which coincides with changes in the community.

Normally, the bulk of the money would be spent in Sydney, but in NSW the army of local and state government bureaucrats dedicated to delaying and frustrating development is actually pushing spending outside the harbour city.

But, Sydney’s largest apartment developer Meriton has been battling the bureaucrats for many years and finally has permission to build on a number of sites, so Meriton is taking the opportunity. Sydney will get its share of development stimulus.

The government must invest in better building techniques to seize on the opportunity. Picture: Dean Martin

But, given the dangers of Sydney many of the developments driven by the “welcome home” movements are taking place around the country, including Melbourne, where it is possible to buy large tracts of land not far from the CBD and obtain the required permissions with the help of social housing.

The big trading banks are forecasting big falls in interest rates over the next 12 months. They might be right, but they have not factored in the extent of the economic stimulation ahead.

To the extent those bringing their money back to Australia are enhancing it with borrowing they are usually not using banks, rather moving into the private lending market where longer-term money is available.

The banks might not be aware of the extent of the development in the pipeline. To discover what is happening, Reserve Bank governor Michele Bullock will need to undertake detailed research.

The stimulation pipeline coincides with unions planning an unprecedented drive for wage rises and conditions which lower productivity when a large number of enterprise agreements expire next year.

At the same time, the government itself is pressing Fair Work for wage increases.

Against this, we have cost reductions in the pipeline as a result of artificial intelligence. As with the stimulus created by the “welcome home” money, I don’t think the Australian community fully understands the dramatic changes ahead in the labour market.

At the moment, the Australian labour market is boosted by the impact of government spending, which is lifting the demand for labour.

This is likely to continue because, for the most part, Australian governments have not embraced artificial intelligence.

Over the next 18 months the dual stimulus should provide a strong economy, but labour shortages will emerge in many areas of the building industry.

At the moment a slump in building activity is enabling good tender prices to be achieved, but those builders who survived the slump will need to be very careful they don’t get caught by rising costs when pitched against fixed-price tenders.

The government’s accelerated skills training program will need to be implemented at full pace, and almost certainly we will need to bring migrants in with specific building skills.

We also need greater technology investment to embrace new building techniques which lower costs. The last thing Australian needs is another building cost blow out.

The problem for Australia comes when the “welcome home” money is spent and the government’s rising borrowings become unsustainable in a world where ratings agencies are waking up to what is taking place. Australia has already had a warning.

Originally published as Albanese government must exploit wealthy Aussies investing in real estate, helping builders