Financial case for new building needs uplift

Poor productivity in the building and construction sector is making housing and infrastructure less affordable, adding pressure to the cost of living and inflation. 

Master Builders Australia has today told the Senate Select Committee on Productivity that one of the key drivers of declining productivity is the weakening financial case for new building projects. 

National Director of Policy Melissa Byrne and Chief Economist Shane Garrett warned that the sector is at risk of stagnation, an outcome that will neither solve the housing crisis nor deliver the infrastructure and buildings Australia needs. 

“On one hand, building costs have risen by almost 50 per cent since the pandemic, while on the other, the Federal Budget is disincentivising investment. Modelling shows the Budget measures will reduce new net housing supply by 8,700 homes. It simply doesn’t stack up,” Mr Garrett said. 

Ms Byrne said the Government’s recent deal with the Greens to restrict investment by self-managed super funds (SMSFs) in new housing would further worsen the situation. 

“Early indications have shown that the federal government may have underestimated the impact of the SMSF restriction. This investment halt will kill projects.  

“Removing what may appear to be a relatively small number of SMSF purchasers does not simply result in fewer investor sales. It can delay or prevent entire projects from proceeding. 

“For many projects, particularly apartment developments and large master-planned communities, investor pre-sales are essential to securing finance and commencing construction,” Ms Byrne said. 

The peak building and construction advocate is calling on the Government to return to a pro-supply agenda and back policy settings that will deliver it. 

In his opening statement to the Committee, Mr Garrett urged the examination of how financing conditions, tax settings and other policy measures can be used to maximise new home building activity in the years ahead. 

Policies that would strengthen the financial case for new building include accelerated depreciation, increasing the Instant Asset Write-Off to $150,000, and a practical, holistic reconsideration of the Federal Budget’s tax changes. 

Media contact: Darren Disney, National Director – External Affairs & Engagement
0488 660 170| darren.disney@masterbuilders.com.au