Building companies have warned the industry could be in serious trouble if the state government does not give them financial help, as Perth recorded the tightest residential vacancy rate in the country.
Key points:
- The labour shortage is hampering the construction of new homes
- The industry says low interest loans would allow them to complete projects
- This would ease the rental crisis, as Perth’s vacancy rate hit 0.4 per cent
The ABC visited an emerging suburb in the city’s south-east, where the vast majority of dozens of sites earmarked for new houses lay dormant amid the skilled labour crisis.
DASCO Building Group Director Damien D’Ascenzo said in a normal building environment, the street would be packed with tradies.
“The street is pretty much empty, and there’s jobs just sitting there,” he said.
Mr D’Ascenzo said it was like nothing he had experienced before.
“[There’s] nothing happening on sites with delays via subcontractors or suppliers not being able to supply on time,” he said.
“I’ll go to a site and there’s no-one there, I’m waiting for my tradies and I’m waiting for a specific material, and you know, nothing can be done.”
He rejected any suggestion builders weren’t doing everything possible to get jobs done.
“I care very dearly about my clients, I’ve gone within the contracts and only given price rises, which were according to the contract.”
It comes as Perth’s vacancy rate hit 0.4 per cent, the lowest in the nation, according to new data from SQM Researh.
Builders ‘under extreme pressure’
Home Builders Action Group chairman Jason Janssen said the government needed to help, and fast.
“Small to medium businesses, like clients, are under extreme pressure,” he said.
“Clients are obviously doing it tough, they’re staying in their rental properties, paying mortgages for prolonged periods of time.
“Effectively builders are working through projects, maybe the lengthy projects from government grants from two or three years ago, which they’re effectively losing money on.”
Mr Janssen said companies and contractors could absorb an increase in prices of 5-6 per cent.
But they had no way of knowing prices would escalate by an average of 25 per cent a year during COVID.
“If they had’ve been made aware of it, and they came back to the clients at the beginning of the job and saying look we’re going to put up the price by 25 per cent, there’d be public outcry for builders price gouging.”
Builders have sold assets to fund price rises to get homes built but insolvencies have increased nevertheless.
“If nothing’s done, I believe this next 12 months is going to replicate what we’ve experienced in the last 12 months, to be perfectly honest,” Mr Janssen said
In the 2022-23 financial year, 132 construction businesses in Western Australia alone entered external administration or had an administrator appointed, compared to 93 in the previous year.
So what could the government do?
Mr Janssen suggested well-directed, low interest and interest-free loans could provide builders with incentives to complete houses they were losing money on.
“We’ve got a hangover of an estimated 10,000 to 20,000 houses that are still yet to be completed, there are people that are living in rental properties that could effectively free up a rental house if the house was finished in a timely manner,” he said.
Housing Industry Association executive director Michael McGowan said the issues were common across the world, but pronounced in WA.
“Labour is our biggest constraint,” he said.
“We know cash flow is a bit of a challenge at the moment and between the industry and the state government, we’re looking at things to increase workforce capacity, but unfortunately it’s a 12 to 18 month fix.”
In a written response, WA Commerce Minister Sue Ellery said she was happy to keep the conversation going with industry stakeholders, and would consider amendments to the Home Building Contracts Act.
But she said a proposed loan or assistance scheme for residential builders was not something the Cook government would consider at this time.