How Queensland homes are beating the construction crisis

Queensland’s average new house build cost rose in July but it’s still down from highs early this year thanks for savvy ways builders and homeowners are making the numbers work.

Queensland’s average new house build cost climbed $18,000 in July to $470,109.

But Australian Bureau of Statistics building approvals data released last week indicates it remains just below a $476,754 peak set in April this year, with the nation’s biggest builder indicating homebuyers giving up on pricey double-storey builds and luxuries like marble benchtops was key to the plateau in construction costs.

But with new home approvals currently well short of the levels needed to reach an ambitious 1.2 million new homes goal for the nation by 2029, some of the country’s biggest property players have warned its time for the governments to join home builders in tightening their belts.

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Material costs on the front end of construction like timber frames have begun to soften.

Simonds Group chief executive Rhett Simonds said the home building giant had observed material and labour costs start to soften at the front end of construction on things like timber frames and even brickwork, and there were also signs demand would soon ease for later stage trades including tilers.

In dollar terms, Metricon chief executive Brad Duggan said timber frame costs had dropped from a $5.40 a linear metre peak in May last year to about $2.80 today.

The boss of Australia’s biggest home builder noted the main reason for a plateau in building costs prior to July had been a change in the mix of homes being built.

“There’s a lot more single-storey homes rather than double-storey homes. There’s a lot less marble benchtops,” Mr Duggan said.

With construction timelines still more than double historic norms, Mr Duggan said the industry would need to be “very careful” as it ramped up to near record levels of building activity to reach the nation’s new housing targets.

Housing Industry Association senior economist Tom Devitt believes the worst of the construction crisis is behind us.

Construction sector insolvencies reported to the Australian Securities and Investments Commission in the past financial year soared to 2213, almost double the figure for the prior 12 months, and a further 442 have already been announced since July 1.

The insolvencies are the fallout of an industry crisis sparked as record housing construction collided with material and trades shortages over the past two years, leading to the collapse of major builders including Porter Davis, Clough Group, ProBuild and Condev.

But Housing Industry Association senior economist Tom Devitt said they now believed the worst of the nation’s construction sector insolvencies were behind it.

“We are not expecting an insolvency spiral where the whole industry runs into trouble now, we are hoping the last numbers are the shadow,” Mr Devitt said.

Mr Duggan added that as building volumes continued to slow insolvencies would centre on supply chain and subcontractor businesses.

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Property Council of Australia CEO Michael Zorbas would like to see governments do more to boost housing diversity.

Property Council of Australia chief executive Mike Zorbas said governments needed to do more to encourage housing diversity if the nation was to reach the 1.2 million new homes target by 2029.

Mr Zorbas said while Queensland had made good inroads into analysing where it should focus housing supply efforts, the state government would still need to consider both tax and planning reforms.

However, he said the state’s preparations for its upcoming Olympic Games hosting duties would put a heavy burden on the state’s coffers as well as trades and materials there.

“Any state that has got those tens of billions of dollars in project pipelines is going to have cyclical issues with getting enough trades or getting A-frames for houses or building apartments,” he said.

Mr Devitt agreed and said both interest rate reductions and planning tweaks would be needed to get “anywhere close to the government’s 1.2 million homes target over the next five years”.

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Originally published as How Queensland homes are beating the construction crisis