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Event: Denita Wawn interview with Oliver Peterson, 6PR Perth Live
Date: Wednesday 30 November 2022, 3.40pm AWST
Speakers: Oliver Peterson, host 6PR Perth Live; Denita Wawn, CEO Master Builders Australia Topics: housing supply, ABS building approvals, inflation
E&OE
Oliver Peterson, host 6PR Perth Live: Joining me now is the CEO of Master Builders Association Denita Wawn. Good afternoon.
Denita Wawn, CEO Master Builders Australia: Good afternoon.
Oliver: Look we’ve heard about it for some time but now that new ABS figures showing new home builds, the cost of construction is up 20 per cent year on year. That’s huge.
Denita: Isn’t it amazing? I knew that we would have some increases and certainly it was all trending towards that but to now have that confirmed as over 20 per cent no wonder it’s frustrating clients, builders, and their subcontractors alike.
Oliver: Major supply issues have been identified on our talkback lines for months, if not the last couple of years through the pandemic. Is any of that starting to ease at the moment?
Denita: We are seeing some easing on the supply of materials that are needed for that commencement of building so bricks, timbers and so forth. What is still relatively high are all the products required to finish trade. That’s because as we get through the height of building approvals of two years ago, they’re coming into completion over the next 12 months. So, things will start to stabilise depending of course on ongoing inflationary pressures along with supply of labour. But we will see that easing but equally we will see an easing also of building approvals that is not good news for builders.
Oliver: We did see construction works start to trickle up in the last quarter but you’re saying that will not be sustained?
Denita: No unfortunately it won’t. Master Builders Australia is forecasting that while the civil and commercial building sector around the country will be maintaining fairly well with some slight increases, we can’t say the same unfortunately for residential housing. And that is particularly in relation to detached housing. That is because we’ve brought forward demand, people are concerned about interest rates. They’re concerned about the inflationary costs. So, people are now easing off their purchasing of a new home which is of concern to us.
Oliver: So new home buyers might just sit on their hands for a little bit longer if they can?
Denita: That’s right. And if they are looking at interest rates, if they are looking at 20 per cent increases to the cost of building a new home, it is totally understandable that clients are reluctant to get into the housing market at the moment for new homes. We are seeing however renovations still maintain quite a higher rate. But definitely new homes are particularly bad. And that’s even worse for Western Australia where there is very much a detached house dominance market in WA which means that the dips we’re forecasting for residential building nationally will even be worse in Western Australia. So, we’re doing everything we can from a policy perspective to look at how we fill that gap. How do we look at increasing demand in new housing and that particularly is focused at the moment around increasing migration into this country, about social and affordable housing because bizarrely enough people are not wanting to build a new home. But we know we’ve got a shortage of homes. So, we need to try and resolve that differential.
Oliver: On the social and affordable housing front. We do have an ambitious federal government plan though to build a million affordable homes over the next five years. So, will that fill some of that shortfall you’re speaking about this afternoon Denita?
Denita: Yes, well I think that the case will be that we will meet all the targets that are being looked at by the Treasurer with his state and territory counterparts. Not only on social and affordable housing but housing generally. We know that we need to build well over 200,000 homes per year, each and every year between now and 2030 to meet population demand. And that doesn’t include social and community housing. That’s on top of that number as well. So, we know that we need to be building more houses, we need to be building more houses that are fit for purpose for all people within the housing spectrum. And as a consequence, we hope that if some of those issues are resolved and we do have greater coordination between federal and state governments, that those gaps that I referred to earlier, will be filled so there is consistency of work for the builders and their subcontractors.
Oliver: Might we also have hit the peak of prices? I know we talk about the inflationary pressures there and 20 per cent year on year. But with what is forecast over the next six to 12 months, might it be an opportunity as well for first home buyers that they won’t be paying the peak of the prices as they have over the last couple of years?
Denita: I’m not an economist and I don’t have my crystal ball in front of me Oly but nevertheless the economists are telling us that inflation is likely to peak by the end of this year. So, we’ll be keeping a close eye on those December numbers in February. And we also need to be very conscious of the fact that this is not just an Australian issue about high inflation. We’re seeing huge inflationary figures in the US in particular so what impact that has on the Australian economy. So, we’re still feeling fairly nervous about next year but certainly we’re hoping that in the second half of 2023 we will see a price decline, we hopefully will see more Australians, more people coming to Australia to work here. So, will [inaudible] down labour shortages which might mean that overall prices will start going down.
Oliver: Let’s hope so. The inflation rate obviously easing today, 7.3 to 6.9 per cent overall. Good on you. Appreciate your time, Denita. Thank you very much.
Denita: Absolute pleasure, thank you.
Media contact:
Dee Zegarac
National Director, Media & Public Affairs
0400 493 071
dee.zegarac@masterbuilders.com.au