Australia’s biggest home builders, after suffering a 23 per cent slump in starts last year due to the constraints of soaring costs and delays, now face an uncertain future as capacity returns at a time when the clouds of higher borrowing costs and an economic uncertainty hang over consumers.
Housing starts of the largest 100 builders slumped last year to a decade-low 57,830 in the year to June, Housing Industry Association figures show – the lowest since 51,102 in 2013 – as insolvencies soared 73 per cent in a sector crunched between fixed price contracts and wildly rising input costs.
More down than up: Housing starts by the country’s biggest 100 builders sank almost 23 per cent last year.  Natalie Boog
Conditions have since improved, with veteran developer Nigel Satterley telling last week’s Australian Financial Review Property Summit that builders including Metricon – which the HIA ranked as the biggest builder for the eighth year running with 4693 starts – were through the “cyclone” and now writing profitable contracts.
But it’s unclear whether demand will pick up for detached housing, which still forms the backbone of Australia’s new housing creation, at a time when the states, territories and federal government have undertaken steps to boost the volume of new housing stock by 1.2 million homes over the next 5 years.
Public investment in housing offers a counter-cyclical stimulus, but private demand is crucial for the scale of pickup in supply the country needs.
“Market confidence remains subdued in most markets,” HIA chief economist Tim Reardon told The Australian Financial Review.
“We do have a bit of positivity in SA and WA and Queensland is not as bad as Sydney and Melbourne.”
Separate HIA data shows the construction time of a detached home has narrowed to 11.5 months from 12.2 months a year ago – but still longer than the 8.3 month figure of 2019 – and builder competition for work is constraining price growth.
But consumers have yet to return. New home sales have been falling for the past year on a rolling 12 month basis.
With much of the pipeline of work that was swollen by a combination of the former Coalition federal government’s HomeBuilder scheme and record-low borrowing costs now coming to an end, builders face an uncertain prospect of little new work to come.
Higher home and building costs had left customers in the two largest cities more exposed to the effects of higher borrowing costs, Mr Reardon said.
“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,” he said.
“Because it costs more to build a home in these areas, customers need a greater deposit than they do in other regions.”
A comparison of the 2023 HIA-Colorbond steel Housing 100 Report released on Wednesday with the previous year lays bare the recent turmoil of the home-building sector.
The report, a voluntary measure of the largest 100 builders – companies can choose to be included in the report or not – in a highly fragmented home-building sector, shows that the market share of the biggest 100 slipped again to 33 per cent from 36 per cent in FY22. In FY21, they accounted for 44 per cent of the market.
Detached houses accounted for 79 per cent of total output, up from 77 per cent in FY22, semidetached homes ticked up to 8 per cent from 6 per cent and apartments fell to 13 per cent of all starts from 18 per cent.
The previous 12th largest home builder in the country with 1753 starts, Porter Davis Homes, went into liquidation in March and the Victorian company has disappeared from the report. Some of its work was taken up by fellow builders Metricon and Simonds.
Perth-based BGC Housing Group, which fell from fourth place in FY21 with 4205 starts to 10th place in FY22 with 1980 starts, dropped to 780 starts in the latest report to 22nd on the national table.
In a sign of the drop-off in work for new apartments over the year, large contractor Multiplex, which ranked as the country’s 15th biggest home builder in FY22 with 1376 starts, sank to 62nd, with just 219 starts.
Even Meriton Apartments, owned by Rich List developer Harry Triguboff, slowed its pace of development over the year, with a slip from 2893 starts to 2267. However, in a sign of the overall slowdown hitting Australian home-building last year, Meriton rose in the top overall ranking from sixth to fourth.
ASX-listed Mirvac picked up to 14th with 1258 starts from 19th a year earlier with 1233 starts. Mirvac’s number of semidetached homes almost doubled from 120 to 237, while its detached houses slipped to 12 from 16 and apartments also fell to 1009 from 1097 a year earlier.
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