Home builds slow down: 40% longer for houses, 80% for apartments

There’s been a lot written about why the Albanese government will have difficulty meeting its National Housing Accord aspiration to build 1.2 million well-located homes by mid-2029.

Most of this has focused on blockages to the housing supply.

We’ve heard plenty of complaints from developers about state and local government planning blockages and “red tape”.

For greenfield housing areas, these complaints usually centre around slow land releases and service provision, onerous environmental assessments and hefty levies, which many developers say cuts into their margins and makes financing for projects harder to obtain.

In areas closer to city CBDs, the complaints are usually about height and density restrictions on big developments because of local planning controls, the huge costs, and the slow pace of processing development applications.

Economists and big businesses usually point to the dampening effect of a high interest rate environment, a shortage of construction workers, and spiralling building costs as blockages to new housing supply.

One missing factor in a lot of this analysis is an examination of the time it is actually taking to build houses, townhouses and apartments that have been approved.

A new study shows it is taking considerably longer to build all types of housing than it did 15 years ago. 

And the industry group behind the analysis says unless steps are taken to address this, construction time blow-outs will keep getting worse.

The details

Master Builders Australia has started a new campaign called “It shouldn’t take this long to build a home.”

To back up its claim that housing build times have blown out, the construction industry group examined years of Australian Bureau of Statistics data.

The group says the figures show that fifteen years ago, it took, on average, 9 months to build a free-standing house. 

In 2023-24, it says the same house now takes 12.7 months to build – an increase of over 40%.

Townhouse developments have blown out by roughly the same quantum, from 11.3 to 16 months.

Master Builders says the situation is even more grim for apartment buildings.

In 2010-11, it took an average of 18.5 months from approval to completion.

Now, it takes 33.3 months – an increase of 80 per cent.

Master Builder’s CEO Denita Wawn says these extended construction time frames are impacting the industry’s ability to meet housing demand and tackle the housing crisis.

“With advancements in technology and construction methods, we should be building homes faster, not slower, she says.

Looking at the reasons for these construction time blow-outs, Ms Wawn lists a range of factors, including “labour shortages, declining productivity, union pattern agreements, supply chain disruptions, complex regulatory requirements, occupational certificate backlogs and critical infrastructure delays.”

Master Builders claims productivity on building sites has declined by 18% in the last decade.

“This data proves what happens in a construction environment without meaningful (industrial relations) reform,” Ms Wawn says.

Master Builders says there are other measures that can be taken to address bottlenecks and inefficiencies in the construction process.

“Streamlining regulatory approval processes, encouraging adoption of digital solutions, introducing incentives to grow the workforce through domestic and international means, and strengthening the domestic supply chain are just some examples,” CEO Denita Wawn says.

State vs state

What’s interesting about the Master Builders figures is the large discrepancies between build times in various states and territories.

For example, building a free-standing house in the Northern Territory has only increased by about 10% in 2010-11 figures, while it’s blown out by a massive 75% in Western Australia.

In the face of strong population growth - both from overseas and from other states - this is undoubtedly one of the factors that has helped push up house prices so steeply in WA.

CoreLogic figures show house prices in Perth grew 22.4% in the year to the end of October.

Apartment go-slows

The statistics compiled by Master Builders highlight the huge challenge Australian governments face to build more of the high-density “in-fill” apartment developments that states like New South Wales and Victoria, in particular, are keen to see more of in Sydney and Melbourne around existing infrastructure.

Where investors are looking to buy this Spring

Related

Ending negative gearing won't fix housing crisis, warns finance expert

Related

In New South Wales, apartment project build times have essentially doubled over the last 15 years.

Master Builders is highly critical of a lot of the industrial agreements in place on big apartment projects.

“Patent agreements utilised in commercial buildings, including high-rise apartments, have been around for quite some time, and they have a lot of productivity constraints,” Denita Wawn says.

“If there's wet weather, you finish at 11, and you don't come back until the next day but get paid for the full day.

“If you look at a non-union site, they'll wait it out, they'll do some training, they'll sweep it down, and they'll restart.

“And you can have situations like that happening up to about 50 or 60 days.

“In Queensland, likewise, there are provisions around if it gets too hot,” she says.

“So, we've got to be smart in how we negotiate with the unions.”

However, she also highlights “process” and “additional regulatory compliance” as major barriers that help to blow out build times.

“A builder I was talking to the other day said he started 40 years ago, and he'd have two staff and have up to 20 trades working for him around his jobs.

“Now, he said he'll have about 20 staff, as well as 20 of his key site managers and so forth, working around, so the compliance is huge, and again, that takes time and money.”