It’s a tough time for home builders who are struggling to stay afloat after new housing starts plummeted by over 20 per cent in 12 months.
Rising construction costs and lengthy construction delays in the wake of COVID have seen new home build starts dry up at a time when consumers are getting hit with higher interest rates and economic uncertainty.
Housing Industry Association figures lay the situation bare, with the 100 biggest builders in the country recording the lowest housing start figures in 10 years, down to 57,830 in the year to June.
Building company insolvencies have skyrocketed up over 70 per cent while they try to construct new homes on fixed price contracts at the same time as suffering delays and rising input costs.
On a positive note, however, conditions for builders are improving and they may have seen the worst of it. Large builder Metricon, for example, is now signing off on new profitable contracts.
Australia’s largest home builders by reported housing starts.
While things may have bottomed out for many builders, they will now be wrestling with softening detached housing demand and a struggle to get new work on their books.
With houses and building costs being higher in Melbourne and Sydney, customers in our biggest two cities are hit harder by the higher interest rates currently in play.
“Sydney and Melbourne have seen the most downturn in market confidence, which is not surprising as they’re more exposed to the cash rate than other markets,” HIA chief economist Tim Reardon told the Australian Financial Review.
“Because it costs more to build a home in these areas, customers need a greater deposit than they do in other regions.”
New build constructions are currently mostly detached houses, accounting for 79 per cent of the market, with semidetached homes making up 8 per cent and apartments 13 per cent.