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Event: Interview with Luke Grant, 2GB Weekends
Date: 9 March 2024, 11.50am AEDT
Speakers: Denita Wawn, CEO Master Builders Australia
Topics: housing supply; labour shortages; migration
E&OE
Luke Grant, host 2GB Weekends: There was a story out today and I want to have to the CEO of Master Builders Australia, Denita Wawn, in a moment or two. But PropTrack, REA Group’s data business, has had a look at the rental numbers around Australia and the affordability of rentals around the country. Rental affordability today is at its worst level in at least 17 years. Seventeen years. Households earning a median income of roughly $111,000, can afford to rent the smallest share of property since 2008. Just 39 per cent of rental properties advertised for rent on realestate.com.au from July to December in 2023 were affordable across the country for a typical income household spending a quarter of their income. So about 40 per cent of properties advertised were affordable if people take a quarter of their income in average households around the country. That’s extraordinary. Renters in New South Wales, Tassie, Queensland, face the worst affordability. A typical income household can afford 28 per cent of rentals advertised in New South Wales. So, again, renters in New South Wales, a typical income household, if you see 10 places for rent, and you’ve got the typical income, you can afford three of them. Three of them. It’s amazing. And all this connects up because the latest Bureau of Statistics building approvals data that came out this week showed that building approvals fell a further one per cent in January after falling 10.1 per cent in December. Now, the problem seems to be the most acute in the construction of detached homes, where building approvals slid 9.9 per cent in January. It’s an 11.5 year low. All the planning restrictions and lack of capacity to undertake critical infrastructure so land is home building ready as well as slower approval processes just add to the problem. Until we boost the supply of new apartments and units, houses, whatever, we won’t be able to alleviate the pressures in the rental market particularly and elsewhere. It’s a vicious circle. Denita Wawn, CEO of Master Builders Australia, and joins me on the line. Denita, nice to talk again. Hope you’re well.
Denita Wawn, CEO Master Builders Australia: Very well, thanks Luke, and good morning everyone.
Luke: I’m really keen to get into this because when we last spoke I learned so much about just how bad the situation is. We see numbers of dwellings added or approvals added and they’re down, they’re down, they’re the lowest in a year, the lowest in five years, 10 years, whatever, and we have such a boost to the population. And we go my goodness how the hell did we get out of this? Now, I think when we last spoke, it was about a lack of tradies. Is that still a problem here? And if so, how bad is it?
Denita: Yeah it is like a trades amongst other things. But lack of staff is definitely the issue. We’ve estimated that we will need another half a million new entrants into the industry over the next two years. And we’ve got to put that into perspective that we currently have 1.3 million people in the industry and we need another half a million. Now, that in part is because we’ve got an ageing workforce and we’ve got to renew. And so we’ve got to stop people who are leaving the industry, but equally, we know we need a hell of a lot more. I’ll give you a really good example. At the moment, part of the reason why there’s not enough build is because new building sites have to wait sometimes years for electricity connection, water connection, and that’s because there is also shortages of people who work in critical infrastructure. So, it starts at the very beginning of the process and just keeps on accumulating until it reaches, eventually, to the house builders themselves.
Luke: Wow, people hearing that will be horrified, although they’re seeing it, you know, play out generally or they know someone who’s affected by this. Half a million tradies, there’s no way we can educate half a million Australians. So largely, these are people that would want to come with their skills from overseas to Australia. But we’re not the only people that need tradies I assume.
Denita: No, unfortunately not. There is a worldwide scarcity of tradies and particularly tradies who meet our appropriately defined standards, of a licenced trade worker. So there is a huge demand for them around the world and we’re of course working with the federal government around how we encourage more people. But we then have problems of where to house them. It’s a vicious cycle as you say. But equally, the issue is sometimes we can get them but then we have long lead times in terms of getting their trades recognised which is a state and territory government issue. So, we believe that there’s got to be a concerted effort of stop talking and start acting around all these silly practical things of getting more people into the sector so we can get on with it.
Luke: See I don’t, I believe it because you tell me, but I don’t understand how we don’t say, okay you’re from Ireland; I think I had a bloke ring me or text me about this a week or two back, okay so you’re a plumber from Ireland. You want to be a plumber here. I think he has to wait, or he told me he had to wait, it took a year. Why can’t it be one month of intensive training and then six months of working with a plumber here and then away you go, do your do your best. I mean it, it seems to me that you’re one of the few people that gets the urgency. I know there are others, but this is pretty bloody important this stuff, isn’t it?
Denita: It is and we hear those stories every day like your Irish plumber. I’ve only recently been talking to Austrian electricians and all sorts of things. It is ridiculous the time it takes to get licences recognised and I would have thought even you could have a provisional licence while you meet Australia’s standards as you say, Luke. So, we’re pushing for change. But when it’s even harder to get licences recognised between states in Australia, let alone between countries then we know we’ve got a serious problem. So, we’ve got to address those issues. The government is acutely aware of them, but nevertheless, it is the typical frustration that we have in the housing debate is that some things are the responsibility of the federal government and some things are the responsibility of state governments and there’s an awful lot of finger pointing that’s got to stop.
Luke: And looks to me, and I’m probably doing some finger pointing here, that we’ve got a federal government who are falling over themselves to do whatever the union movement asks of them and basic things like this which can make a material difference, I don’t know if they put on the back burner, but they certainly don’t get the prominence. That’s what appears to me to be like. Does it feel like that to you?
Denita: Yeah, certainly we’re frustrated with the sometimes the lack of productivity and in fact productivity sapping regulation because of the behest of some in the federal government working in the behest of the union movement. We’ve seen that in the recent IR legislation. We campaigned hard, got some compromises near the end of the debate, but there’s still some restrictions there that we’re very concerned about in terms of what it does to our capacity to build efficiently, effectively and quickly. For that is also an issue as well let alone all these labour shortages, let alone the delays in building approvals, development approvals, the list goes on. So, we know there’s a problem. Everyone acknowledges that. We know all the solutions are. The industry is frustrated that it’s not getting on with and fixing those and implementing those solutions.
Luke: Yeah, understandably. What about material costs? We know what happened after the pandemic. Is it still the case that, you know, the cost to build is so much higher than it was pre-pandemic?
Denita: It is, unfortunately, Luke. Our recent assessment of ABS data shows that a home to build today is 40 per cent higher than what it was in 2019. A lot of that is in relation to labour shortages. But materials are still high. Materials are generally 35 per cent higher than what they were pre-pandemic. So that is also exacerbating the situation. We don’t have material shortages but the prices are. which means that building a home is high. And that also means that investors, whether they’re mum and dads or large institutional investors are not actually going ahead with building because they’re not going to get the returns that they expect. It’s going to cost them too much and more than what they can get in terms of on-selling that property. So, we know there’s a lot of land that’s actually got building approvals, but they’re not going ahead because the numbers just don’t stack up.
Luke: Gosh. What a mess it is. Do you feel, Denita, that government listens? I mean, I get a sense whenever I listen to you or talk to you about what’s gone wrong, you nail all the important points, but somehow, the government doesn’t, I don’t know, adopt the suggestions about how we get out of this significant issue. Do they see you as an adversary? Do they, you know, do they accept that, in fact, you’re part of the solution here?
Denita: Look, I think when it comes to the housing issues, government is acutely aware of the problems with this. This has been decades in the making from all parties. And they’ve all put their head in the sands and done a band-aid approach. We need to concerted effort. We know that the National Cabinet in August last year recognised all of these problems. So they’re saying all the right things. They know what the problems are. It’s just the resolution of them is just not happening fast enough. And we’re certainly disappointed, and I was speaking to a large number of my industry colleagues yesterday afternoon, we’re all expressing the same thing; put us in a room together and have a practical discussion and let’s just tick this list off of all of these problems and getting things going. It’s just as simple as that.
Luke: Yeah, that would be such a step in the right direction. Thanks a lot Denita. Nice to talk to you again.
Denita: Likewise. Thanks Luke.
Media contact:
Dee Zegarac
National Director, Media & Public Affairs
0400 493 071
dee.zegarac@masterbuilders.com.au