Is It Safe to Build Right Now? A Look at the Australian Home Building Industry

24th June 2024

Finance & Budgeting Pre-Construction News & Industry Insights

This article explores whether it’s safe to build a new home in Australia right now (2024), covering industry challenges, improvements in build times, builder stability, and land opportunities.

Is It Safe to Build Right Now? A Look at the Australian Home Building Industry

Introduction

The Australian home building industry has faced significant challenges in recent years, from supply shortages to builder liquidations. If you’re considering building a new home, you may be wondering: Is it safe to build right now? In this episode of the Home Building Hub Podcast, hosts Colin Bischof and Darren Brennan discuss the current state of the industry, the challenges builders and buyers have faced, and why now might actually be one of the best times to build.

The Challenges the Industry Has Faced

Before assessing the current landscape, it’s important to understand what the industry has gone through in recent years:

• COVID-19 and Supply Chain Issues – The pandemic led to significant supply shortages, affecting key building materials such as timber, steel, and concrete.
• Government Stimulus and Overloaded Builders – The $25,000 HomeBuilder Grant resulted in an overwhelming number of building contracts, leading to extended construction delays. And yes, to those who believe builders took too much on, there's certainly some truth to that as well.
• Trade Shortages – Increased demand for skilled trades led to significant bottlenecks in construction timelines.
• Builder Liquidations – Several builders collapsed, including major players like Porter Davis, leaving thousands of homebuyers in limbo.
• Rising Costs and Interest Rates – Material price increases and regulatory changes added to the complexity of home building for the Builder, and rising interest rates certainly did not help on the affordability side for the Homebuyer.

These factors led to an environment of uncertainty, making many homebuyers hesitant to proceed with their projects. However, as Colin and Darren explain, the situation has significantly improved in recent months.

Why It’s Now Safer to Build Than Before

Despite past struggles, several key improvements have made home building a much safer and more reliable process:

1. Reduced Build Times

Builders have significantly reduced their backlog of projects, allowing new builds to proceed faster.

• Single-story homes are now being completed in as little as five to six months.
• The pre-construction phase has also become more efficient, reducing wait times before construction begins.

2. Increased Consumer Confidence

Confidence in the housing market is rebounding. Industry data suggests consumer confidence is on the rise, moving from historic lows to a much healthier level.

3. Improved Builder Stability

Builders have had time to adapt to post-pandemic conditions, refining their financial and operational strategies to ensure stability.

4. Land Availability and Discounts

Unlike previous years, titled land is more readily available, meaning buyers can secure a block and begin construction much sooner. Land agents report that discounts of $20,000-$25,000 on land purchases are currently achievable (with even more in the coming months).

5. Better Trade and Supplier Relationships

Builders have learned valuable lessons from the pandemic and now have stronger relationships with their suppliers and trades, ensuring more predictable pricing and supply chains.

Key Challenges That Remain

While conditions have improved, there are still some factors to consider before building a home:

1. Media Doom and Gloom

The media often focuses on negative stories, which can create unnecessary fear. While some builders are still struggling, the majority are operating efficiently and delivering homes successfully.

2. Interest Rates

Interest rates remain a concern for many prospective homebuyers. However, financial institutions apply a buffer when assessing borrowing capacity, meaning that if you qualify for a loan today, you should be able to afford repayments even if rates increase slightly.

3. Regulatory Changes

Recent regulatory updates, such as the seven-star energy rating requirements and bans on certain materials (like crystalline silica stone), have added complexity to the building process. While these regulations improve home quality and sustainability, they can also lead to increased costs.

Is Now the Right Time to Build?

If you’ve been waiting for the right time to build, now could be a great opportunity. Here’s why:

• Normal build times mean less waiting.
• Builders have stabilised, reducing financial risks.
• Land prices are negotiable, offering better value.
• More positive customer experiences are being reported.

Pro Tip: Negotiate Land Prices

If you’re purchasing land, ask for a discount. Many developers are offering reductions, and negotiating could save you thousands.

Key Takeaways

• The industry has stabilised, making now a safer time to build than during the pandemic.
• Build times have improved significantly, with homes being completed in a timely manner.
• Consumer confidence is rising, and builders are operating more efficiently.
• While interest rates and regulatory changes pose challenges, the overall market conditions are more favorable than they have been in years.

FAQs

Q: Are builders still going into liquidation?

A: While some builders are still struggling, the majority have adjusted to the market and are operating more sustainably. Doing due diligence on your builder’s financial stability is always recommended.

Q: Will home prices drop further?

A: While some discounts are available, overall home prices are stabilising. Locking in a price now can be beneficial before potential future increases.

Q: Should I wait for interest rates to drop before building?

A: If you can afford to build now, waiting may not be necessary. Interest rates are already factored into borrowing assessments, and delaying could mean missing out on current builder incentives.

Listen to the Full Episode

For a deeper dive into this topic, listen to the full podcast episode: Is it Safe to Build Right Now?

About the Home Building Hub Podcast

The Home Building Hub podcast, hosted by industry experts Colin Bischof and Darren Brennan, is Australia’s premier resource for new home buyers. With weekly episodes featuring special guests, the podcast provides objective, high-quality insights into the home building process—completely free and without sales pitches. From understanding financing options to navigating the complexities of building a new home, each episode is packed with actionable advice and tips.

Explore more episodes at Home Building Hub and join our growing community of informed home buyers.

Disclaimer

Whilst we’re all about providing value to you, this article should not be considered as legal or financial advice. It contains general information only and is based on the content discussed during the podcast episode. This information is relevant to the episode’s release date and may not be applicable at the time of reading. Always seek independent professional advice tailored to your personal situation before making any legal or financial decisions.