Qld housing crisis: Billions in shovel-ready projects in limbo amid builder drought

Billions of dollars in projects are in limbo in South East Queensland due to builder shortages, including a third of Brisbane’s major projects and half of the Gold Coast’s.

• Editor’s view: Pressure on developers

Billions of dollars worth of shovel-ready projects across South East Queensland are without a builder, and developers are rapidly losing money on projects desperately needed to house the flood of people moving to the state.

Exclusive research by PRD reveals more than 40 per cent of all 196 residential projects worth over $10 million due to start construction in South East Queensland between January 2022 and 2024 do not have an explicit builder or design builder assigned.

Over a third of projects in Brisbane are without a builder, and over half of developers are waiting on a builder on the Gold Coast.

It’s even worse on the Sunshine Coast, where more than sixty per cent of all housing developments have no builder.

Among the projects without a builder assigned include a $50 million, 146-unit mixed-use development at Broadbeach Waters that was due to start construction in May, an 88-unit development in Mount Gravatt East and a nine-storey residential building in Palm Beach that was due to start construction last year.

PRD chief economist Diaswati Mardiasmo said the data included projects that were classified as both ‘firm’ and ‘possible’ in terms of going ahead with construction, and although there were more projects with a specific builder assigned than not, it was still a “significant number” of projects without a builder.

Dr Diaswati Mardiasmo

“If we can’t fully rely on projects that already have a builder going ahead, due to labour and material issues, higher construction costs, and delays in delivery timelines; how can we rely on our housing supply actually increasing?” Dr Mardiasmo said.

“There are a lot of builders who are being absorbed by infrastructure projects...because they know it’s reliable, it’s a five or 10 year project, and it’s funded by the government, which means private developers are scrambling to try and find builders.”

Recent ABS figures show building costs have risen more than 40 per cent in the past three years.

Master Builders Queensland CEO Paul Bidwell said the state government’s massive construction program over the next 10 years would only add to the problem, as developers would have to compete for workers and builders to deliver crucial housing supply.

“We know the government is going to spend $20 billion in 2023-24,” Mr Bidwell said. “That doesn’t even include the fact we need homes for the builders and tradies we bring in to do the work and the population growth we’re seeing.

“We need something like 18,000 workers each year on top of what we already have, and they’re expensive because skills are in high demand. Then you’ve got materials costs on top of that.

“Even if developers can get builders, the costs of building are such that developments aren’t stacking up.”

Paul Bidwell

Mr Bidwell said Brisbane City Council’s Housing Supply Action Plan, which included waiving infrastructure charges on thousands of eligible builds across high-density areas, was one step towards solving the problem, but nowhere near enough.

“We need to get building costs to drop,” he said.

“There’s no simple solution that’s going to fix it — there’s going to need to be a mix of smaller measures.”

Mosaic Property Group, which has 13 residential projects under construction across South East Queensland, is in one of the better positions because it is both a builder and developer.

But managing director Brook Monahan said even he was finding it very difficult to make projects stack up financially in the current environment, mainly due to the cost and availability of labour.

“It is becoming so difficult that many of the sites we are running feasibilities on currently are so far in the red that land owners would have to pay us to take the site to make it work,” Mr Monahan said.

“This is not going to change until price expectations for sites start to become more realistic, construction costs stabilise rapidly, or established apartment values go up in price materially.”

Mr Monahan said developers were also having to compete with the state government for workers and builders as it prioritised major infrastructure work in the lead-up to hosting the Olympic Games in 2032.

“The workforce to build projects is still a key driver of cost escalation,” he said.

Brook Monahan

“With the current extent of the government infrastructure program, we are now competing for labour, which is only exacerbating the problem.

“The scope and scale of the public infrastructure program is putting significant strain on builders and subcontractors in terms of their availability for residential and commercial projects.

“This will continue to further exacerbate the chronic new housing supply challenges that South East Queensland is currently facing.”

Mr Monahan said many construction workers had also left the industry for lifestyle, a career change, or as a consequence of financial stress.

“That’s why it’s critical that immigration is encouraged to fill this massive trades gap in the labour market in the short-term, combined with a substantial improvement to programs that encourage and support trade skill development locally,” he said.

Policy changes over time had also added significant cost to projects over the past five years, such as requirements for increased carparking, design, setbacks and deep landscaping, which had driven up the cost of housing.

Tessa Developments managing director Brendan Tutt said he knew of dozens of developers who were paying huge interest on sites as they waited to secure a builder.

“Developers who can’t get builders to start on a site is what eats away at profits, which makes projects harder to stack up,” Mr Tutt said.

“It makes projects increasingly unviable, which only hurts future supply.”

Originally published as Qld housing crisis: Billions in shovel-ready projects in limbo amid builder drought