WA’s building industry starts tentatively re-emerging from tough traumatic years

There’s growing confidence WA’s building industry is emerging into the sunlight after several dark and difficult years.

“It feels like we’re climbing out of a deep hole,” said home builder Jason Janssen.

Both the Master Builders Association and the Housing Industry Association believe the residential construction sector is now in recovery mode.

Exactly 18 months ago, The Sunday Times’ assessment of the industry was parlous.

Commercial builders like Probuild, Pindan, Jaxon Construction and Firm Construction had gone to the wall. The biggest shock was the collapse of the 104-year-old Clough Group in December 2022.

Scores of home builders also went belly-up in a “profitless boom”. The industry in WA had been overheated by State and Federal Government grants that sparked a stampede of customers it didn’t have the capacity to handle.

Skilled trades were scarce and the bidding war for their services sent costs skyward, made worse by price rises from pandemic-related supply chain disruptions.

The “cost and cashflow crunch” led to the agonising and much-publicised delays in home builds, with many stretching beyond four years.

There were just 6286 houses under construction in June 2020. By December 2022, the number was 21,504.

In April last year, WA’s then-biggest home builder, BGC, halted all new sales to concentrate on completing almost 4000 stalled home builds.

The chronic delays caused extreme angst and friction between builders and their clients. In BGC’s case, customers have launched a class action against it.

The optimism of better days ahead — for both builders and their customers — is based on a healthy pipeline of work.

“While some builders are still emerging from the COVID haze, the forward outlook for residential building demand looks incredibly strong,” HIA executive director Michael McGowan said this week.

“The focus of industry is doing it in a sustainable way (not taking on more work than they can handle) that doesn’t break the system and provides the consumer with the best possible experience.”

Building approvals were up, with about 18,000 in the past 12 months.

The improved outlook comes despite higher-than-normal insolvency rates.

In the year to August, 153 construction companies entered external administration, a 7.7 per cent increase on the previous 12 months.

“Construction businesses are more exposed to price increases than other businesses because of the way contracts are structured,” MBA chief executive Matthew Pollock said.

“There’s a risk to businesses that don’t price inflation into their contracts, particularly if projects are delayed. I wouldn’t say we’re completely out of the woods yet.”

Mr Janssen, chairman of the Home Builders Action Group, believed some builders were saved by no-interest loans recently provided by the WA Government.

The first round of the Builders’ Support Facility saw $5.7 million allocated to eligible builders to assist in the completion of 97 homes. Applications for the second round close on Monday.

“It’s helped builders that have just been hanging on to survive and finish those legacy jobs off and enable them to move on to profitable jobs,” Mr Janssen said.

“It’s also enabled clients to get into their houses.”

His own business has lost $1 million over the last three years — the equivalent of eight years worth of profits.

“The builders have been paying for the industry price increases over the last few years. That is now, for the most part, behind us,” he said.

Mr McGowan acknowledged those still trying to finish “legacy projects” were doing it tough.

BGC Daniel Cooper said the shortage of finishing trades, like electricians and plumbers, was challenging, with 90 per cent of its remaining homes at the post-lock-up stage.

Another issue was preference for trades to work on single-storey homes.

“The nuance of this is that shortages are suburb-specific. In some areas of Perth a given builder will have ample trades and in another region a shortage of that exact same trade,” Mr Cooper said.

“With market conditions improving, we are pleased to be handing over the keys to over 200 homes per month.”

While many builders were struggling to source finishing trades, there was a more even spread of demand across trades.

“The bricklayers are busy, the carpenters are busy. We’re getting back to more of a traditional spread of the industry, rather than the pig in the python (situation),” Mr McGowan said.

Contractors were reporting the bricklaying price, which sat around $2-$2.20 per brick at the beginning of the year, was now close to $3, indicating bricklayers were in heavy demand.

The WA industry has been set an ambitious goal — to build 25,800 new homes annually under the Federal Government’s Housing Accord, which aims to tackle the national housing crisis, with the construction of 1.2 million new homes over the next five years.

It’s a mammoth task given WA completed, on average, fewer than 15,000 new homes in each of the five years to 2023.

Under the accord, $3.5 billion is being provided to State, Territory and local governments to support the delivery of new homes, in addition to $2b to increase the stock of social housing.

The biggest obstacle to meeting the goal is capacity.

“We’re going to need to grow and build capacity, particularly in the workforce, if we are going to meet demand moving forward,” Mr Pollock said.

“That demand is coming from government projects. It’s coming from private-sector investment, and it’s coming from population growth, which is the strongest in the country.”

The latest Australian Bureau of Statistics data reveals 159,663 people are employed in the State’s construction industry across residential, commercial and civil sectors.

The MBA estimates it needs to be 200,000.

“We need 40,000 more workers if we’re going to deliver the pipeline of work ahead of us,” Mr Pollock said.

More than 1000 overseas tradies have signed up to come to WA under the State Government’s Construction Visa Subsidy Program, which offers firms looking to hire workers from overseas subsidies of $10,000 to offset migration agent fees, visa applications and relocation costs.

So far, just 230 skilled construction workers have landed in WA, with another 120 expected to arrive soon.

“The hope is that over the next six to 12 months, the rest of those people arrive,” Mr McGowan said.

“What we’ve seen is businesses dipping their toe into the water to see what it’s like and now going back a second and third time.”

The program, recently extended by another year, has attracted painters, cabinetmakers, carpenters, glaziers and tilers.

Mr Pollock acknowledged incoming tradies were adding extra pressure to a bursting housing market.

“(The bottom line is) If we don’t get them, we’re just not going to get that work done,” he said.

“We’ve seen apprenticeship enrolments fall by about 25 per cent over the last 12 months.

“WA has a really a great group training industry, but we have seen a fall in employers engaging in group training schemes.

“We had a really strong uptick in apprentice enrolments through COVID because of Federal Government support through the The Boosting Apprenticeship Commencements Program. That has subsequently been unwound.

“We would like to see that scheme or something similar reintroduced.”

The scheme provided generous incentives for employers to hire apprentices during the pandemic. Although enrolments have dropped since it ended, numbers are still well above what they were before 2020.

“Compared to where we were pre-COVID, we’re still seeing good numbers,” Mr McGowan said.

“A lot of those people (engaged under the scheme) are probably now getting towards the end of their time as apprentices and will become skilled tradespersons. Now it’s about how the industry retains them. And I think that’s the next challenge.”

In the past, many tradies aged 25-35 jumped to the mining sector.

BGC hasn’t said when it will resumes sales.

“A restart decision will be made once we have a clear runway that ensures any new build start will have a standard build time frame and not catch up to the current backlogs in market,” Mr Cooper said.

Plenty doubt WA will be able to meet its target under the accord. Yet it exceeded the target when it built 131,240 new homes over the five years to 2016-17. However, the economy and industry were in much better shape then.

The MBA forecasts 124,100 new home starts over the next five years. It believes the best way to bridge the gap is via higher-density home building.

For this, WA needs more tier-two builders who can build medium to high-rise apartment buildings.

Encouraging east-coast builders to enter the WA market was one possibility, the HIA claimed. Tier-one builder Roberts Co has already made the leap west, for the Dunes apartment development in Scarborough.

Property Council of Australia (WA) executive director Nicola Brischetto said the State needed to be building many more apartments to meet the accord and solve the housing crisis.

She said the council was working closely with government to identify initiatives that would “help bridge the viability gap and bring more apartments to market at affordable price points”.

One looming barrier that needs urgent attention is a shortage of titled land to build on.

“Land supply will become more critical over the next 12 months, and investment and co-ordination to deliver approvals, power, water and sewer needs to start happening now,” Mr McGowan said.

“The handbrake for builders selling homes is the availability of titled land in WA, and the activation of estates by utilities who are facing the same trade constraints as the builders,” Mr Cooper said.

There was some good news on that front this week. On Wednesday, the Cook Government announced the release of more than 600ha of new residential land across two sites in the north and south of Perth.

The two sites, in Eglinton and Karnup, are expected to provide 6300 new residential lots.