Event: Denita Wawn interview with Glen Bartholomew, ABC News Radio
Speakers: Denita Wawn, CEO Master Builders Australia; Glen Bartholomew, host ABC News Radio
Date: Tuesday, 9 May 2023, 2.30pm AEST
Topics: Federal Budget, inflation, housing, skill shortages, rental market, investment
Glen Bartholomew, host ABC News Radio: Well, the rental crisis could be set to get worse across the country with official figures showing a record slump in building approvals. The latest Bureau of Statistics data revealing Australia experienced its lowest number of building approvals in over a decade in the first quarter of this year. Denita Wawn is the CEO of Master Builders Australia and joins us now. Good afternoon.
Denita Wawn, CEO Master Builders Australia: Good afternoon, Glen.
Glen: First, why do we think that the first quarter of this year did see the lowest number of building approvals since 2012?
Denita: Well, unfortunately, this is reflective of our forecasts in that it is showing a significant downturn in contracts signed for new homes and new units and so forth. The inflationary figures combined with increasing interest rates has meant that people are extraordinarily nervous of proceeding with investments in new home building. And as such, that’s reflected in those figures. It is extraordinarily alarming given that we’ve got a massive shortage of housing and that is only going to be exacerbated at a time when we also needed greater migration to resolve job shortages around the country.
Glen: Yeah, I want to look at that in the moment. But what about also the other factor – shortages in materials and labour. Has there been some improvement there?
Denita: The shortage of materials certainly has come down. But unfortunately, prices are still very high. We’ve added those inflationary impacts. We had hoped to see them start coming down at the moment but that is simply not occurring and occurring at very, very small increments. So that is still a concern. Not alarm but a concern. The shortage of labour still continues to be an exceptionally difficult situation. It meant that not only has cost gone up but significant delays in completing projects. Which means that we then get hit by delays, about liquidated damages, and it’s not only an impact on builders but also an impact on the clients as well. So that is of significant concern and still remains which is why migration is important. But we are in a catch-22 if we can’t house people.
Glen: The adverse impacts of all of these interest rate increases of course is still to fully flow through to the economy and therefore the official data. It’s going to take a couple of months for interest rates to really have an effect and we’ve had a lot of them. If we get any further ones of course, that will what, only add further weight to this decline?
Denita: Unfortunately, so, and that’s why tonight’s budget is so critically important. We don’t want it to be an inflationary building budget. We want it to be an inflationary decline budget and that’s why the government and the RBA need to work in tandem to work on policies to ensure that we see spending going down. That we then have inflation go down. And hopefully ease that pressure on interest rates. So it is critically important that we have a smart budget tonight and that therefore reduces the pressure on the RBA to pass on any increases. But we’ve got a fragile economy at the moment and the next three to six months is really going to be quite critical.
Glen: How do these figures break down between houses and units?
Denita: Well units is a particular concern that we see as a significant decline. But equally, single residential dwellings as well. But the units is where we are really concerned about. If you’re going to increase migration into this country, you need those units. It has an impact on migration. It also has an impact on rent. And those rent increases that we’re seeing at the moment are real alarm for people around the country. And the quicker we get resolution around the building of units and medium-density the better. It’s good to see National Cabinet coming out and talking about build-to-rent but that’s only part of the answer. We need to ensure that we’re providing investment incentives for institutional investors right through to the mum and dad. And at the moment it’s simply not there. You’re not getting the returns that you would expect if you’re investing in the rental market.
Glen: Detached house approvals down again. But 15 per cent lower than in the same month last year. 15 per cent in 12 months. That’s significant. What does it mean for the construction industry?
Denita: Well it’s of concern. We’re in a situation at the moment where we are very busy with building activity with that large surge of demand as people were stuck in their homes and feeling fairly secure in their jobs so therefore, they went out and looked at renovations and new homes. So we’re very busy. But it’s a profitless boom of building activity at the moment. But if you look at the forward books, it’s not looking good. We have forecast a significant decline in housing activity for the next financial year and that is coming to fruition as we see those housing approval numbers. There is concern but alarm as yet by the builders that there is enough activity. But if the building approvals continue to decline, then there’s significant impacts. Not only for the builders and subcontractors but for the long-term well-being in terms of meeting those housing commitments that the federal governments, state governments and territory governments have all committed to a million homes over five years. And at this stage, those building approvals are showing that it’s going to be increasingly difficult to meet that change without major structural change with supply level which means more action by the state governments and territory governments and local government.
Glen: Do we need to grease the wheels a little more and take away some of the onerous requirements around planning approvals and the like?
Denita: Absolutely. We’re seeing some really good work come out particularly the Western Australian government around making life easier in terms of planning. But the three key issues that we need addressed, is greater flexibility of our planning. The recognition that we need more medium-density building, particularly in the middle rings of our cities. We need to look at the impacts of developer charges. Properly taxes now make up more than half of the taxation of state and territory and local governments. And we need a return back into the community with that taxation grab. And then of course, the important thing about land supply. Where there is available land? What is being done to ensure that we have adequate land both brownfields and greenfields, to build the homes for all Australians? So the big focus now is that need for action by state and territory and local governments more so than the federal government.
Glen: Well, let’s see what the federal government does for its part at least tonight. But in the meantime, Denita Wawn, thanks very much.
Denita: Pleasure, thank you.
Glen: CEO of the Master Builders Australia group pointing out the fall in building approvals coming just as population growth surges to a record high and returns of overseas migrants, students and tourists. When demand outstrips supply, prices and rents will rise.
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