Terry’s View: Why builders aren’t building
Home builders and property developers make their money creating new dwellings for Australian households. If they get it right, they can make lots of money doing what they do.
When they decide NOT to do what they do, you have to ask why. Why are the builders of major projects of housing or apartments walking away from their plans? Why are big companies who have spent years and millions of dollars planning a major project making the decision not to build?
We’ve seen many instances recently. An example is the decision by AVJennings to abandon a major housing development near Caboolture in the outer northern suburbs of Greater Brisbane. This project would have added 3,500 new homes to an under-supplied market.
Brisbane is a market with high demand and a serious shortage of homes. Why would a big developer with a proven track record and the capacity to deliver these kinds of projects make the very big decision to walk away from the project?
The answer is: that it’s simply not viable. AVJennings said massive cost escalations – including the infrastructure charges imposed by local councils and their long delays in granting approvals – meant projects like this were no longer viable.
The new construction code has added tens of thousands of dollars to the cost of building a house, in just the latest example of politicians imposing new policies which add massively to the cost of creating dwellings, at a time of extreme shortage.
I have had discussions with developers who say that the cost of creating big residential projects is so high, it’s not financially feasible to proceed. They would have to place such a high price on the end product that no one would be able to afford to buy the homes. This is true for high-rise apartment buildings as well as housing estates.
It provides further confirmation that all the core problems in the housing industry - the dwelling shortage, deteriorating affordability and the rental crisis - are all caused by our elected representatives.
